Splitting a pension in a divorce

[spyles]

My wife and I are divorcing and I have agreed to make monthly payments to her amounting to half of my pension income. Will my tax liability be based on my full retirement income or on half of it?

[CatherineR]

I am assuming the payments of the pension income will come directly from you as alimony payments for a divorce decree post December 2018.  In that case the pension income reported under your social security number will be considered 100% your income.  The alimony payments paid to your spouse are NOT deductible on your return or includable in income on your spouse's return for 2022.   This is an updated rule from the under the Tax Cuts & Jobs Act of 2017.  This tax rule would apply if the payments are structured as alimony.  

Another method would be having the plan administrator divide the pension benefit and send separate payments to each.  This would avoid all the income reported to one recipient with no deduction for alimony payments.  Usually, the spouse who is awarded part of a pension must obtain a qualified domestic relations order (QDRO) that can be submitted to the pension plan administrator. A QDRO informs the plan administrator how to divide the pension benefit when it comes time.    Separate 1099 Rs would have to be issued to each recipient for tax purposes from the pension administrator.  I would consult further with your attorney regarding this situation.    

Here is an IRS tax topics resource regarding alimony but be aware of the pre and post 2018 divorce changes:

https://www.irs.gov/taxtopics/tc452

[Lizzette2]

This is a great resource to start determining if you will be taxed on the entire pension or just the portion that you are retaining.   

https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-divorce

Basically, your ex-spouse should a Qualified Domestic Relations Order with your plan administrator so that half your pension funds go directly to the ex-spouse. 

Otherwise, there is a high probability the entire pension is taxable to you.  You will get the 1099-R reflecting the entire pension paid directly to you.  That is taxable to you.   You could possibly deduct this depending on when you got divorced, any judgement of alimony payments, or maintenance payments that could be considered deductible....again depending on when you got divorced and what is written in the divorce decree.