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  1. #1
    guitarjeff is offline Junior Member
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    Will I Have to Pay Taxes on my divorce settlement?

    My state is CA. My divorce is finalized and I now have recieved some monies in a negotiated divorce settlement, will I now have to pay taxes on the settlement money?
  2. #2
    LdiJ is offline Senior Member
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    Quote Originally Posted by guitarjeff View Post
    My state is CA. My divorce is finalized and I now have recieved some monies in a negotiated divorce settlement, will I now have to pay taxes on the settlement money?
    It depends on where the money came from.

    If it came from a retirement account via a QDRO and you cashed it out instead of rolling it over into a retirement account of your own, there will be tax.

    If it came from real property, there may possibly be some capital gains tax.

    If it came from savings there wouldn't be any tax...etc.
  3. #3
    guitarjeff is offline Junior Member
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    The monies came from community property settlement but no property is being sold she gets to keep the house.
  4. #4
    mistoffolees is offline Senior Member
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    If it's a property settlement, there won't be any taxes.

    In general, there are two major taxable items in divorce:

    1. Alimony is taxable to the recipient and deductible to the payor if it is court ordered and meets the IRS guidelines.

    2. If you cash in a pre-tax retirement account you will have to pay taxes and penalties. (If you cash in an after-tax account like a Roth IRA, you won't have to pay taxes, but you would have to pay penalties).

    The principle is that you saved money that was left after paying taxes - so you don't have to pay taxes on it again.

    I guess that raises a third possibility, but nothing you've suggested says it applies:
    3. If you failed to report income to the IRS, you could be liable for back taxes and they could seize the money.
  5. #5
    LdiJ is offline Senior Member
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    Quote Originally Posted by guitarjeff View Post
    The monies came from community property settlement but no property is being sold she gets to keep the house.
    Where did she get the money to pay you, and how did you receive the money?
  6. #6
    guitarjeff is offline Junior Member
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    The monies came from savings she had in the bank from a personal injury settlement from a auto accident several years back.
  7. #7
    LdiJ is offline Senior Member
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    Quote Originally Posted by guitarjeff View Post
    The monies came from savings she had in the bank from a personal injury settlement from a auto accident several years back.
    Ok, then yes you are fine. There is absolutely no taxability there.
  8. #8
    unsure2011 is offline Junior Member
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    I have the same issue, i got divorce and got a settlement

    My ex, is paying me cash outta his bank account, and i just want to use the money to pay off the house. Will i have to pay taxes on this, or can i put it all in the bank and pay off the morgage, also this house, i got outta the divorce, but still owe alot of money on it.
  9. #9
    Silverplum is offline Senior Member
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    Please start your own thread, and be sure to give the name of your state.

    Quote Originally Posted by unsure2011 View Post
    My ex, is paying me cash outta his bank account, and i just want to use the money to pay off the house. Will i have to pay taxes on this, or can i put it all in the bank and pay off the morgage, also this house, i got outta the divorce, but still owe alot of money on it.

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