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Property settlement is NOT deductible...
ONLY alimony payments are deductible for the payer and taxable for the recipient.
.However - for payments - to be treated as alimony - please see IRS pub 504 - page 15 -
Alimony Requirements. A payment to or for a spouse under a divorce or separation instrument is alimony if the spouses do not file a joint return with each other and all the following requirements are met.
-- The payment is in cash.-- The instrument does not designate the payment as not alimony.
-- The spouses are not members of the same household at the time the payments are made. This requirement applies only if the spouses are legally separated under a decree of divorce or separate maintenance.
-- There is no liability to make any payment (in cash or property) after the death of the recipient spouse.
-- The payment is not treated as child support..
So - if all these requirements are satisfied - payments are deductible for the payer, but must be reported as taxable for the recipient.
Same requirements are for federal and state income tax purposes.
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