Taxation of Spousal Support

Tax Treatment of Spousal Support – Canadian tax lawyer analysis

If you pay spousal support, you may be able to deduct the amounts paid to your ex-spouse from your income. Likewise, if you collect spousal support, you may have an obligation to include the amounts paid to you from your ex-spouse in your income. Consult one of our expert Canadian tax lawyers to determine your tax rights and obligations.

Note:: For the purpose of this article, spouse means a husband, a wife or a common law partner.

I have made a payment to my ex spouse. How do I know if it is considered “spousal support” for tax purposes?

In order for a payment to an ex-spouse to qualify as spousal support that may be deducted from your income, it must meet certain criteria:

• You must be living separate and apart from your spouse due to a breakdown of your relationship;
• You must be making the payment as a result of a written spousal agreement or a Court order;
• The agreement or order must refer to the payment as “spousal support”;
• Payments must be payable on a periodic basis and considered an allowance;
• • Your ex-spouse must have discretion regarding how to use the payment.

What if I pay a lump sum to my ex-spouse instead of installments?

Generally, you may not deduct a lump sum support payment made to an ex-spouse from your income, nor is your ex-spouse obligated to include it in their income. However, if the lump sum payment was made to satisfy support amounts owing from previous years, it is deductible by the payor and included in the income of the payee in the year that the payment should have been made. Form A T1198 Statement of Qualifying Retroactive Lump-Sum Payment must be completed and submitted to Canada Revenue Agency to make the tax calculations involved.

What if I make a lump sum spousal support payment instead of a periodic payment to provide security for the future payment of spousal support?

If the purpose of the lump sum is to provide security for the future payment of spousal support to be paid on a monthly basis, you may deduct the amount from your income and your ex-spouse must include it in their income.

What if I make payments to my spouse who lives apart from me, but our relationship has not broken down?

You can only deduct payments to an ex-spouse that are made pursuant to a separation agreement or Court order with respect to a relationship breakdown. If your spouse and yourself reside at different locations but your relationship has not broken down, any payments made to your spouse are not considered spousal support.

What if I paid support payments before a written agreement was finalized?

If the support payment was made prior to a written agreement or court order, it may be deductible by the payer if certain criteria are met. This depends on when the payment was made, the type of payment made and what the agreement or court order says. Consult a professional if you have made or received a payment from an ex-spouse prior to an order or agreement being in force.

What if I make a payment on behalf of my ex-spouse to a third party (such as their landlord)?

It depends on that nature of the payment and the specifics of the spousal agreement. If you have made a payment on behalf of your ex-spouse to a third party, consult a tax professional.

What if I am receiving spousal support from ex spouse’s estate?

If you received spousal support payments from the estate of your ex spouse, you are not required to include the amount in your income, nor is the estate permitted to deduct the amount.

What if I am receiving spousal support from ex spouse’s estate?

If you received spousal support payments from the estate of your ex spouse, you are not required to include the amount in your income, nor is the estate permitted to deduct the amount.

What about Child support payments?

If you have made a child support payment in accordance with an agreement or Court order that was made after April 30, 1997, it is not deductible to you or taxable to the recipient. However, if you made a child support payment pursuant to a Court order or agreement that was made prior to May 1, 1997, it may be deductible to you and taxable to the recipient. If you are unsure, consult a tax expert to determine if your child support payment is deductible.

Canadian tax lawyer Tax Help for Support Payments

As you can see the rules for determining the deductibility of spousal support payments are complex. Consult one of our top Canadian tax lawyers to make sure you are entitled to tax deductions for spousal support payments.