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Employee
June 4, 2019
Question

Is one time final all inclusive marital settlement/settlement paid deductable from my taxable income.Even if i paid it from my INR accound in india,is it still deductible

  • June 4, 2019
  • 3 replies
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Is one time final all inclusive marital settlement/settlement paid deductable from my taxable income.Even if i paid it from my INR accound in india,is it still deductible. Please advice

3 replies

Critter
Employee
June 4, 2019
No ... settlements due to divorce is not a deduction even if it comes out of a retirement account unless it was due to a QDRO ... ask your attorney about this option to see if it is available to you in this situation.
Employee
June 4, 2019

There are two kinds of payments in divorce, property settlements that divide up the marital assets, and alimony or spousal maintenance.

Property settlements, which might include cash, property, investments, and other things, that equalize the two spouses, are never tax deductible by the payer and are never taxable by the recipient.

Alimony or spousal maintenance is taxable income for the recipient and is a tax deduction for the payer.  This can include alimony that is paid as a lump sum instead of as monthly payments.  However, it is also possible that a divorce agreement will say "these payments are designated as not alimony for tax purposes" which makes them not deductible and not taxable, even if they are basically alimony.

So a one-time lump sum payment might be an asset settlement only, or it might be partly an asset settlement and partly a lump sum alimony.  And if it is partly lump sum alimony, that part of it might be taxable to the recipient and deductible by the payer unless the divorce order says it's not.  

The bottom line is that it depends on your exact divorce order, read it carefully and consult your attorney if you are unclear.

And if the payment is partly taxable to the recipient and tax deductible to the payer, it doesn't matter what kind of account the money comes from or where the bank is located. 

Alimony is discussed in IRS publication 17, chapter 8. https://www.irs.gov/publications/p17/ch18.html

Also Publication 504 on divorce. https://www.irs.gov/uac/About-Publication-504

sarang85Author
Employee
June 4, 2019
HI Opus, thanks for the answer. I would like to further know if i can get tax deduction.  I am a foreigner working in US and paying taxes in US only.  But my spouse is in India and I am going to pay one time payment in India. Can i still get the tax deduction in US. Please advice
July 3, 2019
Alimony payments will fall under new tax rules starting in 2019. ... Under the new regulations, the individual who pays alimony to an ex-spouse will no longer be able to deduct those payments. And the recipient of the money will no longer pay taxes on that income.Aug 14, 2018