“Ask A Lawyer” – Tax implications of support payments

If you are a child support or spousal support payer or recipient, as we approach tax season you are likely wondering what the implications of your support payments are. If you are, this post is for you! It is important to keep in mind while you are reading this post that its purpose is informational only. It is for generally purposes, and does not consist of legal advice. It is also important to note that the law frequently changes, and even though this is the state of the law at the time it was written, it may not be current as you are reading it. If you require legal advice please contact Mosher Chedore to talk to one of our skilled lawyers.

It used to be that both child support and spousal support payments had tax implications for the payer and recipient. Payers were able to claim the amounts paid as a deduction, and recipients were required to claim the payments as income. However, there was a change in the Income Tax Act in May of 1997. Therefore if you have an unchanged order from prior to May 1997, and have not consented to a change, then this is still how your support payments are treated by CRA. 

If you have an order after May 1997, a pre-May 1997 order that has been changed since May 1997, or you have consented to following the new tax implications with your pre-May 1997 order, CRA treats child support and child support payments differently. Spousal support payments are still claimed as a deduction for the payers, and claimed as income by the recipient, but child support is claimed by neither. Payers are not permitted to claim the deduction, and recipients do not have to claim them as income. These tax implications will have an impact on the actual cost and benefit of support payments, and should be considered when discussing support. Furthermore, it is possible to claim some of your legal fees used to obtain support. A support payer cannot claim any legal fees, but a support recipient may claim the legal fees expended in collecting late support payments, establishing the amount of support payments, trying to get an increase in support payments as tax deductible legal fees. Unfortunately legal fees for obtaining a divorce or establishing a custody or access arrangement are not tax deductible.