Will I Have to Pay Taxes on my divorce settlement?

[guitarjeff]

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?

 

[LdiJ]

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.

 

[guitarjeff]

The monies came from community property settlement but no property is being sold she gets to keep the house.

 

[mistoffolees]

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.

 

[LdiJ]

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?

 

[guitarjeff]

The monies came from savings she had in the bank from a personal injury settlement from a auto accident several years back.

 

[LdiJ]

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.

 

[unsure2011]

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.

 

[Silverplum]

Please start your own thread, and be sure to give the name of your state.

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.