Parting Ways - Part 2: Spousal Support
This is part 2 of a series on considerations when a couple's relationships comes to an end.
Unlike child support payments, which are not taxable or deductible, spousal support payments may be taxable to the recipient and deductible for the payer.
The simplified rules for a spousal support payment to be tax deductible are as follows:
- There is a court order or written agreement for the payments
- The payments are periodic (usually monthly) and, in some cases, lump-sum payments for retroactive spousal support
- The payment is for the maintenance and support of a former spouse or partner, or in some cases, a parent of a shared child that was not a former spouse or partner
- The payer and recipient are living apart in different residences due to marital breakdown
- The recipient decides what the payments are used for and, in some cases, third-party payments may qualify
- The payment is not a child support payment
Normally, in the first year of making a claim by the payer, the Canada Revenue Agency (CRA) will request all supporting documentation as stated above and receipts for proof of payment.
If payments are made over and above the stated spousal support in the order or agreement, they will not be tax-deductible unless the order or agreement is reissued or revised.
Where both child support and spousal support is paid, payments will be deemed to be child support first and any amounts above the child support will be spousal support paid. In other words, the tax deduction is only available if all child support payments have been paid.
If the payer later receives a reimbursement of spousal support payments claimed, the reimbursement is taxable as income. The reimbursement must be pursuant to a decree, order or judgment or other formal tribunal.
If spousal support payments continue after the death of the payer and are paid by the estate, the tax deduction is no longer available.
Any amount that is deductible to the payer is taxable to the recipient.
Spousal amounts paid to a non-resident former spousal may be tax-deductible and there is no requirement for withholding tax on amounts paid.
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