Area of Law: Tax Law
Answer # 187
Tax rules for child and spousal support paymentsRegion: Ontario Answer # 187
There are two sets of child support rules depending on if the child support order or agreement was made before May 1st or after April 30th 1997.
Rules for child support agreements made before May 1, 1997
If the child support order or agreement was made before May 1st 1997, then the parent who pays child support can deduct the payment amounts from his or her income before taxes are applied. The parent who receives the payments must include the child support payments as income for tax purposes.
Rules for child support agreements made after April 30, 1997
If the child support order or agreement was made after April 30 1997, then the parent who pays the child support cannot deduct the child support payment for tax purposes. The parent who receives child support payments does not include it as part of their total income, and therefore does not have to pay tax on the child support payments.
Changing child support agreements made before May 1, 1997
If you have a child support order or agreement that was made before May 1, 1997 you may have the right to change the order or agreement so that the new tax rules apply. If you elect to make changes, usually it will result in the parent paying support to pay more tax for the year, and the parent receiving the support to pay less tax.
Generally, spousal support payments continue to be taxable in the hands of the recipient and deductible for the payor when there is a written agreement or court order. Any voluntary payments outside those required by the order or agreement may not be deductible by the payor.
If you want to change an order or agreement and the other parent does not agree, you will usually have to go to court. If this is the case, you should consult a lawyer.
For additional information on the tax rules regarding support payments, refer to Canada Revenue Agency.
For legal advice and assistance with tax planning, a CRA tax dispute, or other tax issues, contact Tax Chambers LLP
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