Will I be required to pay income tax on my divorce settlement money?

Asked over 1 year ago - Russellville, KY

We have one house paid for free and clear also one house we are making payments on. We want to sell these two houses and furniture and a race car and a trailer and a truck.

Attorney answers (3)

  1. Joe Wayne Hendricks Jr.

    Contributor Level 12

    8

    Lawyers agree

    Answered . If you have lived in the house for 2 of the last 5 years there will not likely be any capital gains tax on the sale of the residence. If you have not lived in the house then you would have to pay capital gains tax on the amount you receive above your basis in the house. Your basis is generally what you paid for the house minus any depreciation you have on the house if you were renting it. Any amount you receive for your race car, trailer and truck that is more than what you paid for it will likely have capital gains taxes. If you sell them for less that what you bought them for then you most likely will not. Any amounts you receive for child support are not taxable. Amounts you receive as division of marital or community property are generally not taxable. Alimony received is taxable to the receiving spouse and deductible by the paying spouse. In other words you must pay income taxes on the alimony you receive. The spouse paying alimony may deduct the alimony he pays from his taxable income. I would strongly advise you to consult your accountant to make sure you are fully aware of the tax consequences of your divorce settlement.

  2. Cynthia Stump Swanson

    Contributor Level 9

    6

    Lawyers agree

    Answered . Mr. Hendricks gave you a very good and thorough answer. I write only to just make clear that the division of property between you and your spouse is not a taxable event. That is, you don't have to pay any taxes on any property that you two divide up between you. Only if you sell the property later might you have taxes to pay. The best advice here, though, is to talk to a CPA.

  3. Bryant Keith Martin

    Contributor Level 18

    4

    Lawyers agree

    Answered . In general, and subject to the terms of any court order, any alimony or support payments (other than child support) from your spouse to you will be taxable to you. If you jointly sell marital property, you will owe your pro rata share of taxes on the proceeds in excess of your basis and other adjustments.

    DISCLAIMER—This answer is for informational purposes only under the AVVO system, its terms and conditions. It is... more

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Divorce

Divorce is the process of formally ending a marriage. Divorces may be jointly agreed upon, resolved by negotiation, or decided in court.

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