Filing for Taxes after divorce is finalized

[Nocturne]

What is the name of your state (only U.S. law)? Washington State

I am confused. I have read so many things online and fear at this point I have filed my taxes wrongly.

In my divorce it was agreed that the house would be sold and the resulting money (after the bank was paid off) would be split 50/50. Additionally we agreed in the Decree that I would be given additional money (resulting from vehicle and lawyer fees) and that additional money would come from his share of the house.

We lived in the house for about 8 months before the divorce process began, at that point the house was vacant. It was equally in both our names for about 2.25 years before it was finally sold.

When the house was sold, I was paid and all of this money wired straight to my bank account through the escrow company. It is not a large amount since the value of the home had gone down and we owned it for so little time.

One of the additional items of money was that he paid a small portion of my lawyer fees. I have read that lawyer fees paid are considered income and as such I included that money on my tax return.

I read that in my state exchanges of property and assets are not taxed in a divorce so when I filed I did not include the extra money from the sale of the home.

Now I am having second guesses on these things.

Is the money I received considered income? If so I guess I need to amend my taxes. This is really bothering me as I am a very honest person and just want to do the right thing. I am dirt poor and on food stamps and cannot afford to hire a lawyer to resolve this. Any help you can give would be appreciated.

 

[LdiJ]

What is the name of your state (only U.S. law)? Washington State

I am confused. I have read so many things online and fear at this point I have filed my taxes wrongly.

In my divorce it was agreed that the house would be sold and the resulting money (after the bank was paid off) would be split 50/50. Additionally we agreed in the Decree that I would be given additional money (resulting from vehicle and lawyer fees) and that additional money would come from his share of the house.

We lived in the house for about 8 months before the divorce process began, at that point the house was vacant. It was equally in both our names for about 2.25 years before it was finally sold.

When the house was sold, I was paid and all of this money wired straight to my bank account through the escrow company. It is not a large amount since the value of the home had gone down and we owned it for so little time.

One of the additional items of money was that he paid a small portion of my lawyer fees. I have read that lawyer fees paid are considered income and as such I included that money on my tax return.

I read that in my state exchanges of property and assets are not taxed in a divorce so when I filed I did not include the extra money from the sale of the home.

Now I am having second guesses on these things.

Is the money I received considered income? If so I guess I need to amend my taxes. This is really bothering me as I am a very honest person and just want to do the right thing. I am dirt poor and on food stamps and cannot afford to hire a lawyer to resolve this. Any help you can give would be appreciated.

Its most likely that none of the money was income at all.

The only way that any of the proceeds of the sale of the house could be income is 1) if you actually made a profit selling the house (the selling price minus the cost of selling the house was greater than what you originally paid for the house), and 2) the profit was greater than your pro-rated capital gains exclusion. Since the value of the house went down, there was obviously no capital gain, therefore no tax. On top of that, there is still a zero percent capital gains tax bracket, and since you are dirt poor and on food stamps, its likely you fall in that bracket anyway. Therefore, for multiple reasons there is virtually no chance that you would owe any tax on the proceeds from the sale of the house.

I also doubt that the small amount of attorney fees reimbursed to you was income either.

 

[davew128]

I also doubt that the small amount of attorney fees reimbursed to you was income either.

I can't think of a reason it WOULD be income. Division of property pursuant to a divorce and not alimony.

 

[LdiJ]

I can't think of a reason it WOULD be income. Division of property pursuant to a divorce and not alimony.

I couldn't think of a reason either.

 

[Nocturne]

I feel SO much better after reading your replies here.

The house sold for 20,000+ less than what we originally paid for it and I got hardly nothing back after the bank was repaid.
Thank you so much for the information on all of this. I think I was overthinking it all, reading too much and getting confused.

I don't at all fall within a category (even with that money) to owe back any taxes, I did look into that today.
Seems all is good. Though I didn't need to claim the lawyer fees, it seems I misread something along the way, but I guess no harm done since it didn't have any impact on my situation.

Many thanks to you guys for taking the time to read and help me out here. I feel so much better about this all now!