Tax Implications of Child Support Payments
As a parent, you are eligible to claim deductible support payments. It is crucial for you to understand what you should include in the income and where you could maximize your deductions.
According to the CRA, the total amount of support payments you paid under all court orders and written agreements, including any non-deductible child support payments you made, should be entered on line 230. Note that any amount more than that specified in the order or agreement, such as pocket money given to your children, should not be included.
On line 220, you would enter the deductible part, such as any spousal support, of the support payments that you paid. If a court order or written agreement requires payment of support for a spouse or common-law partner, make sure you have filed Form T1158 and registered with the CRA to notify them the eligible deductible portion. In case you have a change in marital status during the year, you may file your tax as indicated in one of the following scenarios:
In case you have a change in marital status during the year, you may file your tax as indicated in one of the following scenarios:
- If you had to make support payments for a child and you were separated from your spouse or common-law partner for only part of that year because of a breakdown in your relationship, you may claim either any deductible support amounts paid for that year or, if you qualify, any applicable non-refundable tax credit, whichever is more beneficial to you.
- If you only had to make spousal support payments and you were separated from your spouse or common-law partner for only part of that year because of a breakdown in your relationship, you may be able to claim the total spousal support amounts paid for that year and, if you qualify, any applicable non-refundable tax credit for your children.
- If you reconciled before the end of that year and you choose to claim the spouse or common-law partner amount, you may also qualify to claim the non-refundable tax credit amounts transferred from your spouse or common-law partner.
Note that if you have more than one recipient to whom you are making support payments, your tax situation could vary.
In case of falling behind in your support payments, you may have made on lump-sum payment to bring your requirements for previous years up to date. You should give the recipient of the support payments a completed form T1198.
On the other hand, as a recipient, you must include any support payment received under a court order in income on lines 156 and 128 of your income tax and benefit return for the year. As a payer, there are certain legal fees that are not deductible.
If you are the recipient of support payments, there are legal fees that are deductible. Finally, make sure you keep a record of receipts that indicate your name, the date of payment, and the amount you paid, in case the CRA asks for supporting documents for audit purpose. These may include but not limited to cancelled cheques or cheque images, signed receipts from the recipient, and statement or letter from the provincial agency supporting the actual amount of support paid.
If you are receiving or paying any kind of support payment, it is very important to understand any tax implications that may arise. At Tax Doctors Canada, we can help. We have extensive experience and success in handling Canadian tax matters.
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