Bret and Jay finalized their divorced in 2018. The divorce decree provides that Bret must pay Jay $20,000 per year until their child turns 18 years old in Year 5, upon which the payments will be reduced to $15,000 until Jay’s death. During Year 2, Bret and Jay agreed that Bret would pay $16,000 directly to Jay and $4,000 to a private school for their child’s tuition. What amount, if any, of these payments should be reported as taxable income in Jay’s Year 2 income tax return?

Thus, the amount to be reported as taxable income depends on the method Jay opts for. When tax deductions, you can use the Standard Deduction Method or the Itemized Deduction Method.

Explanation:

The standard deduction basically is a flat-dollar reduction in ones Adjusted Gross Income (AGI). In this method, the reduction one is qualified for depends on their filing status. Various kinds of filing statues include:

Single
Married, filing jointly
Married, filing separately
Head of household

Given that Jay is now single, the amount she can declare as taxable income is $16,000 - $12,400 which is $3,600.

Under the itemized deduction method, Jay can claim a lot of credits. The more credit she claims, the less tax she'll have to pay. However, based on the question, given that she is the one taking care of the child, she can claim up to 20% to 35% of up to $3,000 of daycare and similar costs for a child under if their child is less than thirteen years of age.

Cheers!