Tax Implications of Support Payments - Revision history

Elena Renderos at 18:43, 30 April 2021

2021-04-30T18:43:36Z

Elena Renderos at 02:12, 30 April 2021

2021-04-30T02:12:47Z

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	{{PLSStorybox		{{PLSStorybox
	\| image = [[File:IrenaPLS~~.png~~.png\|link=]]		\| image = [[File:IrenaPLS.png\|link=]]
	\| text = “Melina and I were arguing a lot. Last week she told me I had to move out. I didn’t know what to do. We bought our home together; it’s in both of our names! (Plus I’ve helped with the renos, the mortgage and the bill payments.) A lawyer told me I had just as much right to be in our home as Melina. The lawyer also told me that we can be separated while living in the same home. Now, I live downstairs and Melina lives upstairs while we figure out how to deal with our family issues.” <br>– Sergio, Maple Ridge, BC		\| text = “Melina and I were arguing a lot. Last week she told me I had to move out. I didn’t know what to do. We bought our home together; it’s in both of our names! (Plus I’ve helped with the renos, the mortgage and the bill payments.) A lawyer told me I had just as much right to be in our home as Melina. The lawyer also told me that we can be separated while living in the same home. Now, I live downstairs and Melina lives upstairs while we figure out how to deal with our family issues.” <br>– Sergio, Maple Ridge, BC
	}}		}}

Elena Renderos at 02:12, 30 April 2021

2021-04-30T02:12:28Z

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Elena Renderos at 01:30, 30 April 2021

2021-04-30T01:30:52Z

Elena Renderos: /* Free and low-cost legal help */

2020-09-28T03:49:41Z

Free and low-cost legal help

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	===Free and low-cost legal help===		===Free and low-cost legal help===
	Options for legal help include legal aid, pro bono services, legal clinics, and advocates. [~~https://dialalaw.peopleslawschool.ca/free-~~and-~~low-cost-legal-help/~~ See our information on free and low-cost legal help].		Options for legal help include legal aid, pro bono services, legal clinics, and advocates. [[Free and Low-Cost Legal Help\|See our information on free and low-cost legal help]].

	{{Dial-A-Law_Navbox\|type=families}}		{{Dial-A-Law_Navbox\|type=families}}

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Elena Renderos: /* Proving that the spousal support payments were actually paid */

2020-09-28T03:48:16Z

Proving that the spousal support payments were actually paid

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	Support payments aren’t usually deductible if they’re paid to someone else. A spouse might, for example, pay a smaller amount of spousal support. But, they may make up the difference by covering the mortgage on the family home. Before agreeing to this kind of payment arrangement, it’s important to get the advice of a lawyer or accountant. You want to be sure that Canada Revenue Agency will treat the support payments in the way that works best for your financial situation.		Support payments aren’t usually deductible if they’re paid to someone else. A spouse might, for example, pay a smaller amount of spousal support. But, they may make up the difference by covering the mortgage on the family home. Before agreeing to this kind of payment arrangement, it’s important to get the advice of a lawyer or accountant. You want to be sure that Canada Revenue Agency will treat the support payments in the way that works best for your financial situation.

	~~====Proving that the spousal support payments were actually paid====~~
	~~For spousal support payments to be taxable and deductible, the payments must be '''actually paid'''.~~

	~~Problems can come up when support is paid in cash. One spouse might say they made a payment while the other spouse denies receiving it.~~

	It’s a good idea to make support payments by cheque, electronic money transfer, bank draft, or money order. These are ways that prove you paid. If a payment is made in cash, it’s important to get a signed receipt from the spouse. It should clearly state the amount, the date, and the purpose of the payment.

	~~{\| class="wikitable"~~
	~~\|align="left"\|'''Tip'''~~
	~~Keep a record of every spousal support payment. Keep copies of cancelled cheques or receipts of electronic money transfers. Make a note on each cheque or receipt what time period the payment covered.~~
	\|}

	====Proving that the spousal support payments were actually paid====		====Proving that the spousal support payments were actually paid====

Elena Renderos: /* The spousal support must be paid by a spouse to their spouse */

2020-09-28T03:47:58Z

The spousal support must be paid by a spouse to their spouse

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	Keep a record of every spousal support payment. Keep copies of cancelled cheques or receipts of electronic money transfers. Make a note on each cheque or receipt what time period the payment covered.		Keep a record of every spousal support payment. Keep copies of cancelled cheques or receipts of electronic money transfers. Make a note on each cheque or receipt what time period the payment covered.
	\|}		\|}

	~~====The spousal support must be paid by a spouse to their spouse====~~
	~~Generally speaking, spousal support payments are only taxable and deductible if they’re made by a spouse to a spouse or former spouse.~~

	~~The payor shouldn’t have someone else make the support payments on their behalf, or pay them out of a joint account.~~

	Support payments aren’t usually deductible if they’re paid to someone else. A spouse might, for example, pay a smaller amount of spousal support. But, they may make up the difference by covering the mortgage on the family home. Before agreeing to this kind of payment arrangement, it’s important to get the advice of a lawyer or accountant. You want to be sure that Canada Revenue Agency will treat the support payments in the way that works best for your financial situation.

	====Proving that the spousal support payments were actually paid====		====Proving that the spousal support payments were actually paid====

Elena Renderos: /* Child support is usually not taxable or deductible */

2020-09-28T03:47:44Z

Child support is usually not taxable or deductible

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	\|}		\|}

	====Child support is usually not taxable or deductible====		===Child support is usually not taxable or deductible===
	For child support orders or agreements made '''after 1997''', there are no tax implications for child support payments. That is, the recipient can’t claim them and the payor can’t deduct them.		For child support orders or agreements made '''after 1997''', there are no tax implications for child support payments. That is, the recipient can’t claim them and the payor can’t deduct them.

Elena Renderos: /* Proving that the spousal support payments were actually paid */

2020-09-28T03:47:11Z

Proving that the spousal support payments were actually paid

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	{\| class="wikitable"		{\| class="wikitable"
	\|align="left"\|'''Tip'''		\|align="left"\|'''Tip'''
	~~Spousal~~ support ~~payments are tax deductible and child support payments aren’t~~. ~~Because~~ of ~~this, an agreement~~ or ~~order must be clear about what kind~~ of ~~support is being paid and how much~~. If the agreement says one sum is to be paid for both spousal support and child support, the Canada Revenue Agency will treat the whole amount as child support. In that circumstance, the spouse paying support will not get a tax deduction.		Keep a record of every spousal support payment. Keep copies of cancelled cheques or receipts of electronic money transfers. Make a note on each cheque or receipt what time period the payment covered.
	\|}		\|}

Elena Renderos: /* When spousal support payments are taxable and deductible */

2020-09-28T03:46:16Z

When spousal support payments are taxable and deductible

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	# Paid because of a written agreement or a court order. The written agreement or court order must clearly state the amount to be paid to the recipient as spousal support.		# Paid because of a written agreement or a court order. The written agreement or court order must clearly state the amount to be paid to the recipient as spousal support.
	# Paid on a periodic basis, such as once a month or once every two weeks. (Spousal support paid in a one-off lump sum is generally not taxable or deductible.)		# Paid on a periodic basis, such as once a month or once every two weeks. (Spousal support paid in a one-off lump sum is generally ''not'' taxable or deductible.)
	# Actually paid by the payor.		# Actually paid by the payor.

← Older revision		Revision as of 01:30, 30 April 2021
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	{{REVIEWEDPLS \| reviewer = [http://~~jimalelawcorp~~.~~com~~/~~about~~-~~zahra~~/ ~~Zahra H. Jimale~~], ~~Jimale Law Corporation~~\|date= ~~May 2017~~}} {{Dial-A-Law TOC\|expanded = divorce}}		{{REVIEWEDPLS \| reviewer = [http://bhmlawyers.ca/team-2/samantha-de-wit/ Samantha de Wit], Brown Henderson Melbye\|date= April 2020}} {{Dial-A-Law TOC\|expanded = divorce}}
	Different income tax rules apply to spousal support and child support. Spousal support payments are handled one way, and child support payments another. Learn how the tax rules affect you.		Different income tax rules apply to spousal support and child support. Spousal support payments are handled one way, and child support payments another. Learn how the tax rules affect you.

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	===Spousal support is usually taxable and deductible===		===Spousal support is usually taxable and deductible===
	Spousal support payments are like any other kind of income. The spouse who receives them (the ~~“recipient”~~) must report the support payments as taxable income to the Canada Revenue Agency. And they must pay '''income tax''' on the payments.		Spousal support payments are like any other kind of income. The spouse who receives them (the recipient) must report the support payments as taxable income to the Canada Revenue Agency. And they must pay '''income tax''' on the payments.

	The spouse who pays the support (the ~~“payor”~~) can claim it as a '''deduction'''. (It’s like deducting contributions to ~~Registered Retirement Savings Plans~~ or child care expenses). These deductions reduce the amount of income tax the payor has to pay.		The spouse who pays the support (the payor) can claim it as a '''deduction'''. (It’s like deducting contributions to registered retirement plans or child care expenses). These deductions reduce the amount of income tax the payor has to pay.

	===When spousal support payments are taxable and deductible===		===When spousal support payments are taxable and deductible===
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	For child support orders or agreements made '''after 1997''', there are no tax implications for child support payments. That is, the recipient can’t claim them and the payor can’t deduct them.		For child support orders or agreements made '''after 1997''', there are no tax implications for child support payments. That is, the recipient can’t claim them and the payor can’t deduct them.

	====Parents with a child support order or agreement made before 1997====		====Parents with a child support order or agreement made before 1997====
	Up until 1997, child-support payments ''were'' taxable and deductible. So if child support is being paid under a written agreement or court order made '''before 1997''', those '''older rules apply'''. That is, in those cases, child support is taxable income for the recipient and is deductible from the payor’s taxable income.		Up until 1997, child-support payments ''were'' taxable and deductible. So if child support is being paid under a written agreement or court order made '''before 1997''', those '''older rules apply'''. That is, in those cases, child support is taxable income for the recipient and is deductible from the payor’s taxable income.

	{\| class="wikitable"		{\| class="wikitable"
	\|align="left"\|'''Tip'''		\|align="left"\|'''Tip'''
	Parents with an agreement or order made ''before ~~1997~~'' can, legally, “grandfather in” the old rules which ''allowed'' tax credits and deductions for child support payments. But the couple can also agree '''not''' to. That is, they can agree that they will follow the ''current'' ~~tax~~ rules (so child support would not be taxable and deductible). If they do decide to go that route, they must file a form with the Canada Revenue Agency. Once they do this, they can’t go back to the old rules.		Parents with an agreement or order made ''before'' 1997 can, legally, “grandfather in” the old rules which ''allowed'' tax credits and deductions for child support payments. But the couple can also agree '''not''' to. That is, they can agree that they will follow the ''current tax'' rules (so child support would not be taxable and deductible). If they do decide to go that route, they must file a form with the Canada Revenue Agency. Once they do this, they can’t go back to the old rules.
	\|}		\|}

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	For the support '''recipient''', the cost of '''getting or enforcing''' support is deductible from their income. That is, [https://www.canada.ca/en/revenue-agency/services/tax/technical-information/income-tax/income-tax-folios-index/series-1-individuals/folio-3-family-unit-issues/income-tax-folio-s1-f3-c3-support-payments.html#toc9 legal fees for these actions ''can'' be deducted]. (Though only the fees relating to the support amount.)		For the support '''recipient''', the cost of '''getting or enforcing''' support is deductible from their income. That is, [https://www.canada.ca/en/revenue-agency/services/tax/technical-information/income-tax/income-tax-folios-index/series-1-individuals/folio-3-family-unit-issues/income-tax-folio-s1-f3-c3-support-payments.html#toc9 legal fees for these actions ''can'' be deducted]. (Though only the fees relating to the support amount.)

	The cost of defending a claim for support or payment of support is not deductible.		The cost of defending a claim for support or payment of support is ''not'' deductible.

	{\| class="wikitable"		{\| class="wikitable"