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Taxes and your divorce settlement

On Behalf of | May 26, 2023 | Family Law |

Going through a divorce in Oklahoma or any other state can be expensive. Planning ahead and knowing what to expect are keys to minimizing the financial impact of divorce. Here are a few tips to help you avoid paying taxes on a divorce settlement.


Higher-earning spouses often have to pay alimony to allow a soon-to-be ex-spouse to support them and help them maintain the standard of living they have become accustomed to. These payments may be required indefinitely or until the one receiving the alimony payments remarries. Understanding how taxes related to alimony and divorce is beneficial when reducing how much you must pay in a settlement.

According to the Internal Revenue Service, alimony payments count when payment is made in check, money order or cash, payment is not toward child support or property settlement, you don’t file taxes with the ex-spouse or you are not living in the same household when payments are made. Ex-spouses receiving alimony payments who do not work may not have to pay income taxes, so those earning the money may be liable for payment.

Transferring property

Knowing the best time to settle assets during a divorce is beneficial to help reduce or completely avoid taxes on your property. YOu may want to do so during the first year after the divorce. The IRS looks at property transfers in divorce during the first year as a nontaxable gift, helping you avoid taxes during a divorce settlement.


Only one parent can claim exemptions for children. However, it may be possible to have an exemption waived by the ex-partner. It is beneficial to know about child tax credits and applicable deductions that will allow you to reduce the amount spent on taxes. Two areas to pay special attention to are the child’s medical bills and college education when applying for federal student aid.

Going through a divorce can be heartbreaking and frustrating. However, knowing how taxes affect your divorce settlement can help you save money and simplify the situation.