Is a cash divorce settlement payment from my wife's 401(k) taxable? Does it contribute to what tax bracket I'm in?

[1jsenterprises1]

 My biggest concern is do I include the divorce settlement amount with my other income when determining what tax bracket I am in?

[VolvoGirl]

If you got the 1099R for it then it is taxable to you.  If she got the 1099R it is taxed to her.

[Critter]

Unless you rolled the 401K distribution in to your own IRA then the QDRO is taxable to you.

[Opus 17]

Normally, assets distributed during a divorce are not taxable income.  However, 401(k)s and similar plans are different because the money was never taxed when it was contributed to the account.

You have the choice of rolling the money into your own IRA, in which case you will pay income tax on it when you withdraw it in retirement.  

Or you can take a lump sum now in cash, but in that case it will be taxable income to you.  It's added to the rest of your income and taxed at whatever tax rate you pay. But, there is no 10% penalty for early withdrawal in the case of a divorce distribution.