Oregon Tax Consultants Practice Exam

Where should alimony paid or received be reported?

1. Schedule C

2. Schedule D

3. Schedule 1

4. Schedule A

The correct answer is: Schedule 1

Alimony paid or received is reported on Schedule 1 of Form 1040. This is where individuals detail additional income and adjustments to income that are not captured on the main form. For the payer of alimony, it is considered an adjustment to income, thereby reducing the taxable income. Conversely, for the recipient, alimony is treated as taxable income that must be reported. The classification of alimony in this context stems from tax regulations regarding income distribution from divorce or separation. Specifically, the Tax Cuts and Jobs Act, applicable from 2018 onward, changed how alimony is treated: for agreements made after 2018, alimony payments are not deductible by the payer and not taxable to the recipient. Reporting on Schedule C, which is designated for business income, would be inappropriate because alimony is not related to self-employment or business operations. Schedule D is reserved for capital gains and losses related to the sale of assets, thus does not apply to alimony. Schedule A is used for itemized deductions, primarily detailing personal expenditures, and does not include alimony payments or receipts. Therefore, Schedule 1 is the correct choice for detailing alimony transactions on a tax return.