Divorced before 2019? How new alimony rules apply
Is alimony still deductible by payers and taxable to recipients? It depends. There is some confusion around recent tax law changes, but the prior rules generally remain in effect for divorce and separation agreements entered into before 2019.
Old alimony rules vs. new rules
Previously, someone paying alimony could deduct payments made under a legally-binding divorce or separation decree, and the recipient was required to report the corresponding amount as taxable income, if these main requirements were met:
However, the new law repeals the deduction, and inclusion in taxable income, for alimony paid under an agreement executed after 2018. Accordingly, the prior rules continue to apply to pre-2019 agreements.
If you paid alimony in 2018, it's deductible on your 2018 return. Going forward, deductions can still be claimed for years in which payments are made under the agreement. Similarly, alimony recipients continue to owe tax on payments on 2018 returns and possibly beyond.
What happens if an existing agreement is modified in 2019 or later? The alimony generally remains deductible by the payer and taxable to the recipient. However, if the modifications expressly state that the new rules apply, future alimony is no longer deductible to the payer and taxable to the recipient.
This can be important information for bargaining in separation and divorce negotiations. Make sure that modifications to an agreement reflect the intent of the parties.
Building a strong business credit rating
When you apply for a personal loan or home mortgage, lenders generally check your credit score. They want to know whether you're a good risk and whether you'll make payments on time. Once that question has been answered in the affirmative, you may be able to negotiate a lower interest rate, more advantageous payment terms or a larger line of credit.
Small companies face similar scrutiny. Although credit bureaus employ different algorithms and consider additional factors when formulating business scores, a strong credit rating can provide your company with substantial benefits. For one thing, it can help you avoid prepayment for materials and services — a good thing for cash flow. It may also place you in a better negotiating position with suppliers and qualify your business for better interest rates and credit terms.
To establish a solid business credit score, consider the following tips:
Applying for the SS spousal benefit? Get the facts
Deciding when to apply for Social Security benefits can be confusing. It's a decision that can impact your retirement income for decades. Spousal benefits, especially, are easily misunderstood. Here are three questions to consider:
The spousal benefit rules are complicated. You'll want to consider your spouse's timetable for claiming Social Security benefits, your own benefits, your spouse's likely longevity (a death can affect widow's benefits), previous marriage history (if you expect to claim benefits based on a divorced spouse's work record), and numerous other factors.
Check out the Social Security Administration's Benefits Planner: Retirement page for more information. Call if you have questions about how your Social Security benefits will affect your taxes.
Are you being audited by the IRS? Would you like to get a jumpstart on individual tax preparation? If you've been looking for tax services or accounting services, hire Morley Consulting, LLC. Our tax consultants have the skills and knowledge needed to ensure that your individual or corporate documents are correct.
If you've been searching for complete tax services or accounting services, look no further than Morley Consulting. Call our Morton, PA location at 610-544-1094, our Denver, CO location at 303-835-4757 or our Loveland, CO location at 970-663-3564 right away for a consultation.
Don't spend hours going through your corporate books or compiling your individual tax documents. Turn to Morley Consulting for:
857 Kedron Avenue
Morton, PA 19070
Phone: (610) 544-1094
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Denver, CO 80237
Phone: (303) 835-4757
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Loveland, CO 80538
Phone: (970) 663-3564