divorce settlement and taxes

[seeeker]

London, UK.

This is not exactly about alimony but there was no other forum on finance and divorce.

My wife and I are divorcing. I am an American citizen living in London, she is German. Upon divorce I will repatriate, probably to Colorado. I will likely get a six-figure, maybe seven, settlement. My question is how will that be taxed when it is transferred to an American bank? For now let's just say it's a cash lump sum.

Is it called "income"? - like any employment?
I know different kinds of assets are taxed differently, but if it is just cash, how is that taxed?
Should it be broken down and spread out in some way?
What can I do to minimize taxes as much as possible?

I know taxes are taxes but I haven't even lived in the US in three years, I don't really want to hand over half to the IRS.

thx

 

[LdiJ]

London, UK.

This is not exactly about alimony but there was no other forum on finance and divorce.

My wife and I are divorcing. I am an American citizen living in London, she is German. Upon divorce I will repatriate, probably to Colorado. I will likely get a six-figure, maybe seven, settlement. My question is how will that be taxed when it is transferred to an American bank? For now let's just say it's a cash lump sum.

Is it called "income"? - like any employment?
I know different kinds of assets are taxed differently, but if it is just cash, how is that taxed?
Should it be broken down and spread out in some way?
What can I do to minimize taxes as much as possible?

I know taxes are taxes but I haven't even lived in the US in three years, I don't really want to hand over half to the IRS.

thx

A property settlement in a divorce is not taxable income. It is a division of assets.

Only money that is taxable for some other reason (like you have to sell a jointly owned asset and there is a capital gain, therefore capital gains tax) would have any tax associated with it.

However, you will have to report the money. Not because its taxable, but because you are required to report any foreign capital that you are bringing into the US, if it is more than 105,000.