Is my equitable share (cash payout) taxable? Child support?

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Is my equitable share (cash payout) taxable? Child support?

Unread postby NJdad76 » Thu Dec 14, 2017 3:36 pm

I'm about to get about $80k cash for my equitable share of the $235k equity in the house.... She gets the house-- I get $80k, essentially she is getting $155k.

But thats another story.


Is the $80,000 taxable? I read that if the divorce agreement wording states must specify "that the buyout is for property in equitable distribution that is incident to divorce"
Along that line, is my half of the 403b taxable if it is for equitable distrubtion fo
Also, is this amount going to be considered income for "the equitable distribution that is incident to divorce"

I am going to try and get the agreement to specify that this payout will not apply to my income for child support evaluation reasons.
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Re: Is my equitable share (cash payout) taxable? Child suppo

Unread postby lionel2013 » Thu Dec 14, 2017 4:19 pm

NJdad76 wrote:I'm about to get about $80k cash for my equitable share of the $235k equity in the house.... She gets the house-- I get $80k, essentially she is getting $155k.

But thats another story.


Is the $80,000 taxable? I read that if the divorce agreement wording states must specify "that the buyout is for property in equitable distribution that is incident to divorce"
Along that line, is my half of the 403b taxable if it is for equitable distrubtion fo
Also, is this amount going to be considered income for "the equitable distribution that is incident to divorce"

I am going to try and get the agreement to specify that this payout will not apply to my income for child support evaluation reasons.


What are you asking? Can you please go back and edit your post so that we can make some sense of it? Fix the incomplete sentences?

The $80k: if you take this money and use it to buy another house then no, it is not taxable.

And no, it should not come into play when calculating CS -- who told you it would? Are you afraid it would be considered regular income??
Whenever you think divorce is bad, remember there are worse things than divorce.
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Re: Is my equitable share (cash payout) taxable? Child suppo

Unread postby dad2grls » Thu Dec 14, 2017 4:44 pm

It's just like it would be if you bought a house and sold it at a profit- if you roll the profits into another house purchase you'll protect all or most of the profits from capital gains taxes, conversely if you put the profits in your bank account it will be subject to capital gains taxes.

Your share of the marital assets should not be considered as income in calculating child support, it's a one time distribution not ongoing income.

You might be confusing this with when asset distribution in a divorce is considered when calculating spousal support- a court is supposed to consider what the recipient spouse is getting in terms of assets and (hopefully) for the payee, lower the support amount, but it doesn't always happen- my exwife got 800k in assets and I still paid through the nose in spousal support, it doesn't look like her distribution was considered at all.
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Re: Is my equitable share (cash payout) taxable? Child suppo

Unread postby lionel2013 » Thu Dec 14, 2017 6:47 pm

dad2grls wrote:It's just like it would be if you bought a house and sold it at a profit- if you roll the profits into another house purchase you'll protect all or most of the profits from capital gains taxes, conversely if you put the profits in your bank account it will be subject to capital gains taxes.

Your share of the marital assets should not be considered as income in calculating child support, it's a one time distribution not ongoing income.

You might be confusing this with when asset distribution in a divorce is considered when calculating spousal support- a court is supposed to consider what the recipient spouse is getting in terms of assets and (hopefully) for the payee, lower the support amount, but it doesn't always happen- my exwife got 800k in assets and I still paid through the nose in spousal support, it doesn't look like her distribution was considered at all.


Spot on.
Whenever you think divorce is bad, remember there are worse things than divorce.
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Re: Is my equitable share (cash payout) taxable? Child suppo

Unread postby TJinCA » Fri Dec 15, 2017 12:19 am

As mentioned, the $80K from appreciation of your house is profit, not income.

Up to $250K (or $500K if you're still filing a joint return) in profit from your primary residence is tax-free, whether you use it to buy another house or not. So you won't owe tax on the $80K and can spend, save or invest it however you want.

On the other hand, you can't do a tax-deferred exchange (1031 exchange) with your primary residence, only with investment properties. So if your profit on your primary residence exceeds $250K/$500K you'll owe capital gains tax on the excess.

I'd recommend talking to a divorce finance specialist on the 403(b) to see what the best options are.
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