Q: I’m separating and my ex-wife and I agreed on an amount for child support. I’ve since learned that I will be paying her approximately $800/month. I’ve also learned that this amount is NOT tax deductible for me and she does NOT have to claim it as income. But she makes $12,000/year more than me. The way I see it, after deductions we both retain less but approximately $10,000 of my take home will be given to her as a loss for me but a gain for her tax-free. Please explain how it is that I cannot claim this as a deduction? It doesn’t seem fair? Are my two kids not considered my dependents for tax purposes? Will she be able to claim the kids as dependents and receive the child tax credit as well? I’d love an explanation of how this is fair from the CRA’s point of view.
A: Your explanation of the situation is correct. Amounts paid for child support are not deductible to the payor or taxable to the recipient. The logic behind the decision to make child support non-deductible and non-taxable was that there should be no direct tax advantages for supporting one’s own children whether living together or apart.
Having said that, between 2006 and 2014 there was a non-refundable tax credit allowed for dependent children, but that claim no longer exists. If your ex-wife remains single, she may be able to claim one of the children as an eligible dependant, which is like an “equivalent to spouse” claim for that child. No other claims are allowed simply on account of her having the children.
Your ex-wife will be eligible for the Canada Child Benefit, like any other parent who cares for children and that will be reduced by her net income over $30,000. The only change here is that your net income is no longer used to determine how much Canada Child Benefit is received.
Evelyn Jacks is president of Knowledge Bureau, which offers e-learning at knowledgebureau.com. Evelyn tweets @evelynjacks and blogs at evelynjacks.com
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