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Child and spousal support taxation

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Below are just a few tax considerations for child and spousal support. During court proceedings, it is very easy to make agreements without realizing the impact on taxation. Lawyers should always advise their clients before proceeding to negotiate the quantum and method of paying child support and spousal support.

  1. Child support is not deductible to the payor or taxable to the recipient.
  2. Monthly spousal support is deductible to payor and taxable to the recipient.There should be a court order or agreement. A periodic payment made before the written agreement will be deemed to be a “support amount” if:
    1. the payment is made in the year of the written agreement or in the preceding year; or
    2. the agreement states that the payments are to be considered to be periodic payments under the agreement.
  3. Lump sum spousal support is NOT deductible to payor and taxable to the recipien This includes single amount paid at once or instalments over time. Some exceptions include:
    • for a past due balance of periodic payments in arrears;
    • to prepay future spousal periodic payments due within a short period of time.
  4. Payment of support from estate do not qualify.
  5. Third Party Payments for the benefit of a spouse, former spouse or child (e.g. private school tuition) are deductible to payor and taxable to recipient if specified in court order or agreement, both parties agree they are taxable/deductible, parties specifically refer to ITA S5. 56.1(2) & 60.1(2)

**The content on this website is not legal advice.