Generally speaking money received as part of the equitable distribution of property incident to a separation is not taxable. If a transfer of property (and money) occurs between spouses within one year of the separation, the law makes the presumption that the transfer was incident to the separation and divorce.
If however, the transfer occurs after one year, the presumption is that the transfer is not incident to the separation or divorce and therefore would be taxable. This second presumption can be rebutted with evidence showing that the transfer of money was part of a property distribution incident to separation or divorce. It is important to note that this non-taxable status of money transferred from one spouse to another, is ONLY applicable to the equitable distribution of property.
Alimony and child support are not part of the distribution of property. Additionally, note that if one spouse is a non-resident alien, the provisions of the tax code also provide an exception to the general rule that gains and losses on property transfers incident to divorce between spouses are not taxed. If one spouse is a non-resident alien, the transfers of property are taxable to prevent the avoidance of U.S. taxes on a later sale by the non-resident alien.
