Question

Under a divorce agreement executed in the current year, an ex-wife receives from her former husband cash of $25,000 per year for eight years. The agreement does not explicitly state that the payments are excludable from gross income.

a. Yes, the former husband is entitled to a deduction for AGI.
b. Yes, the former husband is entitled to a deduction from AGI.
c. No, the former husband is not entitled to any deduction.
d. The former husband is entitled to a deduction, but it is not specified as to AGI or from AGI.

Answer 1

The former husband is not entitled to a deduction for the $25,000 alimony payments to his ex-wife, because alimony is no longer deductible under tax laws if the divorce or separation agreement was executed after December 31, 2018.

Step-by-step explanation:

The question pertains to whether the former husband can deduct the $25,000 paid to his ex-wife from his adjusted gross income (AGI). According to current tax laws, alimony payments made under a divorce or separation agreement executed after December 31, 2018 are not deductible by the payer. Therefore, the correct answer is: c. No, the former husband is not entitled to any deduction.

This is due to changes made by the Tax Cuts and Jobs Act of 2017, which eliminated the deduction for alimony payments. Prior to this change, such payments were deductible for the payer and taxable income for the recipient, assuming certain conditions were met.

It is important for individuals in similar situations to be aware that alimony payments are no longer tax-deductible if the divorce or separation agreement was executed after 2018. Both parties should consult with a tax professional to fully understand the implications of such payments on their federal taxes.