A couple's divorce is finalized in 2025 under a divorce agreement executed that year, which requires one former spouse to make monthly alimony payments to the other. Under IRC Sections 71 and 215 as amended by the Tax Cuts and Jobs Act, how are these payments treated for federal income tax purposes?
- The paying spouse may not deduct the payments, and the receiving spouse does not include them in gross income, because the deduction and inclusion rules that previously applied to alimony were repealed for any divorce or separation instrument executed after December 31, 2018
- The paying spouse may deduct the payments above the line, and the receiving spouse must include them in gross income, because the pre-TCJA alimony rules continue to apply to any agreement finalized before 2026
- The payments are deductible by the paying spouse only if the receiving spouse agrees in writing to report them as income, making the tax treatment elective by mutual agreement of the former spouses
- The payments are partially deductible by the paying spouse and partially includible by the receiving spouse, split evenly, under a transition rule that applies to agreements executed between 2019 and 2025
Why A? And why not the others?
Correct answer: A. The paying spouse may not deduct the payments, and the receiving spouse does not include them in gross income, because the deduction and inclusion rules that previously applied to alimony were repealed for any divorce or separation instrument executed after December 31, 2018
The Tax Cuts and Jobs Act repealed the deduction for the payer and the corresponding income inclusion for the recipient under IRC Sections 215 and 71 for any divorce or separation instrument executed after December 31, 2018; because this couple's agreement was executed in 2025, the alimony payments are neither deductible by the paying spouse nor includible in the receiving spouse's gross income. The option describing an above-the-line deduction and matching inclusion is wrong because it describes the pre-2019 rule, which no longer applies to an instrument executed in 2025; that treatment survives only for instruments executed on or before December 31, 2018 that have not been modified to adopt the new rule. The option making the tax treatment elective by mutual written agreement is wrong because Sections 71 and 215 as amended contain no such election mechanism; the post-2018 treatment applies automatically based on the instrument's execution date, not on the parties' preference. The option describing a 50/50 transition split for agreements executed between 2019 and 2025 is wrong because no such proportional transition rule exists; the new all-or-nothing treatment applies in full to any instrument executed after December 31, 2018.
Source: IRS Publication 504 (2025), Divorced or Separated Individuals (irs.gov/publications/p504)