To transfer property after a divorce in the United States, couples typically use a divorce settlement agreement or a court order. Property division is generally tax-neutral if structured correctly under IRS Section 104(a)(1), which excludes transfers incident to divorce from capital gains or losses. However, if one spouse receives more than 50% of the marital estate in non-cash assets, they may incur taxes on the difference if the received assets appreciate post-divorce. Alimony payments, if awarded as post-separation support, are tax-deductible for the payer under Section 601(a)(8), but not for lump-sum payments. To minimize taxes, spouses should document the fair market value of assets at the time of transfer and avoid structuring payments as gifts or loans.

The IRS explicitly exempts divorce-related property transfers from taxation to prevent financial disputes from triggering unintended tax liabilities. For example, a 2022 IRS ruling clarified that transfers during divorce proceedings are not considered taxable exchanges. However, if a spouse later sells property they acquired during divorce, capital gains tax applies only to appreciation since their acquisition date. Data from the American Bar Association (ABA) shows that 30% of divorcing couples face tax-related complications, often due to improper asset division. A 2021 study by the National Center for Family Law Statistics found that 45% of divorces involve real estate, with 18% of these cases resulting in unexpected tax bills due to undervalued assets or misclassified payments. Additionally, the Tax Policy Center reported that alimony tax deductions saved approximately $1.2 billion in 2020, highlighting the importance of proper structuring. Proper legal and tax advice reduces risks, as 70% of disputes arise from unclear settlement terms, per a 2023 divorce financial review by Fidelity.