Under the terms of a divorce agreement, Ron is to pay his former wife Jill $10,000 per month.The payments are to be reduced to $7,000 per month when their 15 year-old child reaches age 18.During the current year, Ron paid $120,000 under the agreement.Assuming all of the other conditions for alimony are satisfied, Ron can deduct from gross income (and Jill must include in gross income) as alimony:

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Ron can only deduct the amount of alimony that he paid during the year, which is $120,000 in this case. However, since the payments are reduced to $7,000 per month when their child reaches age 18, only $7,000 per month is considered alimony for tax purposes after that point. Therefore, $120,000 - ($3,000 x 12 months = $36,000) = $84,000 can be deducted as alimony for the current year.

Under the Terms of a Divorce Agreement, Ron Is to Pay