Ted earned $150,000 during the current year. He paid Alice, his former wife, $75,000 in alimony. The couple divorced in 2016. Under these facts, the tax is paid by the person who benefits from the income rather than the person who earned the income.

Question

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According to the IRS, alimony payments are taxable to the recipient and deductible by the payer. Therefore, Alice would include the $75,000 in her income and pay taxes on it, while Ted would deduct the $75,000 from his income when calculating his taxes.

Ted Earned $150,000 During the Current Year