Published: March 10, 2020
Last Updated: January 17, 2022
The rules for tax deductions in family litigation are complex and depend on exact nature of the family law litigation. Legal costs to obtain an order for child support are deductible as are legal fees from attempting to collect support payments owed by a spouse. However legal costs related to spousal support are not deductible, nor are the costs of obtaining custody or a divorce. A pre-existing right to a support amount can arise from a written agreement, a court order or legislation. Legal expenses incurred to defend against the reduction of support payments are deductible. However the opposite applies to legal costs of seeking to obtain an increase in spousal or child support, or to make child support non taxable under the Federal Child Support Guidelines, which are non-deductible.
Disclaimer:
"This article provides information of a general nature only. It is only current at the posting date. It is not updated and it may no longer be current. It does not provide legal advice nor can it or should it be relied upon. All tax situations are specific to their facts and will differ from the situations in the articles. If you have specific legal questions you should consult a lawyer."
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FAQs
No, legal settlements are not tax-deductible in Canada. Your personal injury claims, which you can get from car accidents and slip and fall cases, are not considered as taxable income by the Canadian Revenue Agency.
No, family law legal fees are not tax-deductible in Canada. You can’t deduct the expenses you incurred in getting separation or divorce or establishing custody of or visitation arrangements for a child.
Yes, a business can deduct lawsuit settlement payments. It is also worth noting that the legal matter should be business and not personal. If you settle a civil suit by paying the plaintiff, it is considered a tax write-off
