Question: I receive alimony as a primary source of income. Does the Tax Cuts and Jobs Act of 2017 (TCJA) affect my ability to make contributions to my individual retirement account?
Answer: The TCJA eliminates the deduction for alimony paid under divorce and separation agreements signed after the year 2018. Alimony received will no longer be taxable income.
For years ‘taxable’ alimony has been treated as earned income under the rules for IRAs. This means that the person receiving it could use it to make contributions to her own IRA.
The TCJA reverses this rule as no longer will alimony be considered taxable income.
Comment: The implications of this rule change, among many others created by the TCJA, will have many implications that tax advisors are still trying to interpret.
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