Intuit Academy Tax Practice Exam

After 2018, a significant change in the tax treatment of alimony involves the fact that alimony payments are no longer deductible by the payer. This alteration is a result of the Tax Cuts and Jobs Act (TCJA), which revised the tax treatment of alimony for divorce agreements executed after December 31, 2018.

Under the previous tax law, alimony payments made by the payer were deductible on their tax return, while the recipient had to report this income as taxable. However, now with the new provision in place, payers cannot deduct these payments from their taxable income. As a result, the recipient does not include the alimony received in their taxable income, which ultimately changes how both parties approach financial planning in the context of divorce settlements.

This change primarily aims at simplifying the tax treatment of alimony and reducing potential conflicts and complexities that arose from the earlier deductibility provision. It emphasizes that the implications of alimony payments are now more straightforward from a tax perspective, affecting both the payer's and recipient's tax liabilities.