Marital breakdown is a tough road to navigate and tax time presents a new set of challenges. It’s definitely navigable but new rules will apply. By cooperating with your ex and the CRA, tax time will be less stressful for you.
Here are six things to consider as you file this year:
1. Child Support vs. Spousal Support
Child Support is intended to support the children, but it doesn’t last forever and isn’t tax-deductible. Spousal Support is for your ex, and depending on Judge’s ruling or any agreements, may need to be paid for a number of years or possibly the lifetime of your spouse. Spousal Support is tax-deductible, which is a good thing (it could save you hundreds, if not thousands of tax dollars, every year). See, there’s always a silver lining.
2. Child support payments affects your claim
If you pay child support, you can’t claim a child as a dependent. In fact, if you’re paying child support, there are no tax credits available. There are probably other clauses in the rule but that’s basically it.
3. Support your kids
To claim your child as a dependent there are three stipulations that need to be met. The first is financial support. If you directly pay for things like school and childcare fees, clothing and extracurricular activities you are eligible for a claim.
4. Live with your kids
You have to live with your kids to claim them as a dependent. Visits don’t count.
5. Don’t live with anyone else
If you’re lucky enough to pick up the pieces and find someone new that you want to live with, good for you! But it means that you can’t claim your kids as dependents. Of the three stipulations that need to be met, this one causes the most friction at tax time. If you want companionship AND tax benefits, consider getting a cat.
6. Document everything
Put it all in writing. Even if you’re confident that things will stay amicable between you and your ex, writing things down will help ensure that happens. And the CRA will likely ask you to provide documentation for your claim.
Look, you’re already going to be busy trying to get your life back on track so just have the paperwork ready to go. Filing taxes through divorce isn’t easy. You’re being introduced to a new world with a different set of rules. These considerations are the tip of the iceberg but they should point you in the right direction. And if you need more advice or want to dig deeper into these notes, JMH & Co is ready to help navigate this minefield so everyone makes it out with all their limbs intact.