While we generally leave the accountancy questions to the experts, a common topic that arises in family law is whether or not child and spousal benefits are taxable in Canada.
The short answer is, tax rules differ between spousal support and child support. It also depends on whether you’re making the payment, or receiving it. In this week’s blog, we’re examining the tax implications of both types of benefit.
The Basics of Support Payments
A support payment is an amount payable or receivable as an allowance on a periodic basis to support the recipient, children of the recipient, or both. In Canada, there are two types of support payments we typically deal with in family law: Spousal Support and Child Support.
These payments typically need to meet five conditions before they are considered a support payment:
- The payment must be based on a court order or written agreement
- The ex-spouse or common-law partner must be living at a different home address when the breakdown in the relationship happened, or has to be a parent of the child
- The payment is made to help with cost of living for the former spouse, the child or both
- Payment is made on a regular schedule, as laid out in the court order or written agreement
- Payments are made directly from the individual to the former spouse/common-law partner
Now, let’s examine the tax implications of both.
Taxes and Child Support
If you are the recipient of a child support payment you do not need to include this amount when filing your tax return. On the other side of the equation, the person paying the child support is not eligible to claim a tax deduction on the amount paid.
Taxes and Spousal Support
While child support is non-taxable, spousal support does have some tax considerations. If you are the recipient of spousal support, it’s considered fully taxable in the eyes of the Canada Revenue Agency. The figure that will be assessed for tax is the figure laid out in the court order or written agreement. The person making the spousal support payments can claim a tax deduction on the amount paid.
Here to Help with Support Payments
Whether you need help with child support or spousal support, get in touch with us today. Our qualified team of family lawyers are ready to help you.