Question

Michael and Christine were divorced on February 14, of the current year. For the remainder of the current year, beginning on March 1, Michael paid $1,500 per month of spousal support to Christine and $2,000 of child support to Christine for the benefit of their two minor children who reside with Christine. Additionally, he paid her a one-time settlement payment of $10,000 on February 15, current year. All of the payments were made pursuant to a written court order. Which of the following is the amount that Michael may deduct on his current year personal income tax return?

A. $15,000
B. $20,000
C. $25,000
D. $35,000

Answer 1

Michael may deduct $15,000 for spousal support payments from his personal income tax return. Child support payments and the one-time settlement payment are not deductible. Option A is correct.

Step-by-step explanation:

The student has asked about the amount Michael may deduct on his current year personal income tax return based on the spousal and child support payments. According to tax laws, child support payments are not deductible by the payer and are not taxable to the recipient. On the other hand, spousal support payments may be deductible, provided they meet certain requirements.

In this scenario, Michael paid $1,500 per month of spousal support for 10 months (March-December), which totals to $15,000 ($1,500 x 10 months = $15,000). The one-time settlement payment of $10,000 is typically considered separate property and is not deductible. Child support payments are explicitly non-deductible, so the $2,000 per month paid for the children cannot be deducted.

Therefore, the only amount deductible from Michael's personal income tax is the spousal support payments totaling $15,000. This makes Option A the correct answer.