A divorce/separation can be a very difficult time for all parties involved, especially in the beginning.  However, as difficult as it can be, there are critical things that individuals need to be aware of.  The following information is designed to help make things easier down the road:
  • Call CRA and let them know as soon as your marital status changes.  It can affect the amount of child tax benefit and/or GST/HST credits to which you’re entitled.
  • CRA will only consider you separated once you’ve been living separate and apart for a period of 90 days or more due to a breakdown in a relationship.  CRA does not consider you separated until separate residences are being maintained by both parties.  Be prepared to prove to CRA that you are indeed maintaining a separate residence.  Keep copies of leases signed, Hydro bills in your name, change of addresses with insurance companies, etc.  If you’re unable to prove that you’re maintaining a separate residence, they won’t accept your claim of separation for purposes of child tax benefit, GST/HST credits or the eligible dependant claim.
  • CRA may consider you living separate and apart while living in the same residence if that residence has separate living quarters self-contained in the same household.  These types of living arrangements are more difficult to prove to CRA, so be prepared to prove separate parental and financial responsibilities.
If you’re in a situation where a child splits their time between both parents, the parents must agree on who will claim the child on their tax return.  If the parents cannot agree, and both try to make the claim, CRA will disallow the claim on both sides and not allow either parent to make the claim.  Putting this information right into the separation agreement is a good way to avoid these problems down the road - shared custody.

  • If there are two children, each parent can claim a child unless only one parent must pay child support to the other.  In this case, only the parent not paying support can claim the child(ren) - shared custody/eligible dependant
If you pay legal fees in order to receive spousal or child support, the portion of fees relating to this are deductible for tax purposes.  You can ask your lawyer to keep the fees relating to support separate from those relating to separation agreements, divorce proceedings, etc.  Or, your lawyer can prepare a letter for you stating that a certain percentage of legal fees were attributable to spousal and child support issues. Child support payments made are neither taxable to the recipient nor deductible by the payor. Unless:

    •  the child support agreement or court order was entered into prior to May 1, 1997 and hasn’t been altered since that time.  In these cases, the payments are taxable to the recipient and deductible by the payor.  If both parties would like to change this, they can file a T1157 (election for child support payments) in which the parties can elect for the child support payments to not be taxable/deductible.  Once this election has been accepted it cannot be revoked.