Financial and Tax Considerations
- Spousal Maintenance is considered income to the recipient spouse and is tax deductible in full to the paying spouse.
- Child support is not income to the recipient spouse and is not deductible to the paying spouse.
- Transfers of real property as part of a dissolution action are exempt from excise/transfer taxes.
Transfers of retirement funds from one spouse to the other in a dissolution are exempt from taxes or early withdraw penalties if done via a Qualified Domestic Relations Order (QDRO). Generally, when the owner of the account withdraws from a defined contribution plan (401(k), IRA, etc) prior to age 59 ½ they are subject to a 10% percent penalty for early withdraw. When funds are transferred from one spouse to another via a QDRO, the receiving spouse may withdraw their share of funds from the account without penalty.