Can I deduct a lump sum alimony payment made from my 401k via a QDRO during divorce settlement?

This is a great question about a somewhat complicated situation! The deductibility of alimony payments depends on when your divorce was finalized, but there's more to consider with a 401k QDRO transfer. For divorces finalized after December 31, 2018, alimony payments are no longer deductible by the payer (and not taxable income to the recipient). This was changed by the Tax Cuts and Jobs Act of 2017. However, your situation is a bit different since you used a QDRO to transfer funds from your 401k. When you use a QDRO, the tax liability for those funds typically transfers to your ex-spouse. This means she would be responsible for the taxes when she receives or withdraws the money - you generally don't get a separate alimony deduction on top of that. The QDRO essentially makes your ex the recipient of those retirement funds, and she would pay any applicable taxes when she accesses them (unless she rolls them into her own retirement account).

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I've dealt with a similar QDRO situation as part of my divorce in 2023, and the biggest headache wasn't even figuring out the tax implications - it was trying to get answers from the IRS! I spent HOURS on hold trying to confirm how to handle this on my return. After my third attempt waiting on hold for 2+ hours and getting disconnected, I found this service called Claimyr (https://claimyr.com) that actually got me through to an IRS agent in about 15 minutes. They have this system that navigates the IRS phone tree and waits on hold for you, then calls you when an actual human picks up. You can see how it works here: https://youtu.be/_kiP6q8DX5c The IRS agent confirmed exactly what others are saying here - with a QDRO, the tax liability transfers to your ex, and there's no additional alimony deduction. Saved me from a potential audit and I didn't waste an entire day on hold!

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From what I understand about QDROs and 401k transfers during divorce: 1. The QDRO makes your ex-spouse legally the recipient of those funds 2. The tax liability goes with the money - meaning your ex will pay taxes when/if she withdraws the money (unless she rolled it into her own retirement account) 3. For divorces after 2018, alimony is no longer deductible anyway 4. The 10% early withdrawal penalty is waived in QDRO transfers The big advantage here is that you don't take the tax hit or the early withdrawal penalty. Think of it as splitting the asset rather than you taking a distribution and giving her the cash.

Can anyone tell me which line on Form 1040 I would use to claim alimony paid? I've got a similar situation but my divorce was finalized in 2017, before those 2018 law changes everyone's talking about.

Based on your situation, you won't be able to deduct the $78,500 as alimony on your tax return for two key reasons: 1. **Post-2018 divorce rules**: Since your divorce was finalized in July 2024, it falls under the Tax Cuts and Jobs Act changes. For divorces finalized after December 31, 2018, alimony payments are no longer deductible by the payer (and not taxable income to the recipient). 2. **QDRO transfer mechanics**: When you transfer 401k funds via a QDRO, you're not actually taking a distribution yourself. The QDRO legally transfers both the assets AND the tax liability to your ex-spouse. She becomes responsible for any taxes when she withdraws the money (unless she rolls it into her own retirement account). The good news is that you also don't have to report this as a taxable distribution on your return, and you avoided the 10% early withdrawal penalty that would have applied if you had taken the money out yourself and then paid her. Your 401k administrator should have handled all the proper reporting to show this as a non-taxable QDRO transfer for you. Just keep the QDRO documentation with your tax records, but you don't need to file anything special with your return. This is actually a tax-efficient way to handle the settlement compared to taking a distribution yourself and paying her directly!