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MequonCPA, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 2342
Experience:  CPA, Over 30 yrs experience w/individuals and small businesses. Masters in Tax.
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My wife is entitled to half of my pension/401K upon the divorce

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My wife is entitled to half of my pension/401K upon the divorce being finalized. My question is, will she have to pay taxes on that money?
Will I have to pay taxes on that money because it is coming from my pension/401K plan even though it is going to her? Thanks
Hi and Kevin and welcome:

Generally speaking your pension account will be split according to a Qualified Domestic Relations Order (QDRO). As such, you will each have separate accounts. Neither of you will report any income upon the split. Ultimately when either of you take distributions from you portion of the assets, you will be taxed on the distribution. Depending on when the distributions are taken and why, they could also be subject to the early withdrawal penalty rules.

If you wife takes a distribution from the plan in the year of the divorce, there will be tax consequences, but the penalty tax is waived. This applies to company retirement plan distributions only and not IRAs.

Below is a link that expands on my response.
MequonCPA and 2 other Tax Specialists are ready to help you
Customer: replied 3 years ago.

Is she also entitled to the money the company matched my contributions with? Its matched with company stock. Thanks.

Hi Kevin -

The percentage/$ amount of your plan that you wife will receive is determined by your divorce decree/marital separation agreement. If the agreement states that she gets 50% of your retirement plan assets it will include the value of the company contributions (including the stock).

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