When you separate or obtain a divorce, each party must file taxes separately from each other. You are considered separated by the CRA when you have lived separate and apart from your spouse or common law partner for more than 90 days due to the breakdown of a relationship. The CRA definition of “separation” is different from the definition of “separation” used in family matters generally. After your marital status changes, you must notify the CRA. If your taxes are reviewed, you may need to prove your separation to the CRA through separation documents, documents with your new current address, or 2 letters from a third party.
If periodical spousal support payments are ordered or in a written agreement, they should normally be deducted by the payer and added on as taxable income by the recipient. If you have any trouble claiming these speak to your lawyer. Child support is not taxable or deductible.
Obtaining support money or enforcing child support can sometimes incur legal costs. These costs are tax deductible but any fees paid to defend claims are not. Legal fees for divorce or parenting cannot be claimed on your taxes.
If you are sharing parenting of your children and both parties are obligated to pay child support, both parties may be entitled to claim the amount for an eligible dependent. In shared parenting situations, both parties will usually be entitled to receive 50% of the Child Tax Benefit. You will want to talk to your lawyer about including appropriate language in your separation agreement or court order.
If stated in a separation agreement or matrimonial property judgment, joint RRSPs or RRIFs can be split and transferred into both parties’ accounts with no tax penalties. It can also be possible to roll over RRSPs to your spouse without triggering tax consequences.
If your income is low enough, you may now be able to qualify for the GST credit after the separation. If you did not apply for the GST credit on your income tax return and your marital status has changed, you can apply to the CRA for a review.
I recommend that you speak to an accountant for further tax information regarding your separation. I can provide you with referrals to those professionals.
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