Final answer:
The tax treatment of alimony depends on the year of the divorce or separation agreement. Prior to 2019, alimony was deductible for the payer and taxable for the recipient, but this changed under the Tax Cuts and Jobs Act. Alimony payments are no longer deductible for the payer, and the recipient does not include it as taxable income.
Step-by-step explanation:
The tax system treats alimony differently depending on when the divorce or separation agreement was established. Prior to 2019, alimony payments were deductible for the payer and taxable for the recipient. However, under the Tax Cuts and Jobs Act, starting in 2019, alimony payments are no longer deductible for the payer, and the recipient no longer includes alimony as taxable income.
For example, if a couple divorced in 2018 and the payer paid $10,000 in alimony, they could deduct that amount on their tax return, while the recipient would report the $10,000 as taxable income. But if the divorce occurred in 2019 or later, the payer cannot deduct the alimony payments, and the recipient does not need to report it as taxable income.
It's important to note that these rules only apply to the federal tax system. State laws may have their own treatment of alimony payments for tax purposes, so it's always advisable to consult with a tax professional or attorney for specific guidance.