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Tax Consequences of Support

Divorce and separation result in two separate households with different tax consequences. Tax law is confusing and expert advice should be sought. The following are the general principles only. Child support is not taxable nor can it be claimed as an expense. Spousal support is tax deductible by the person paying it and must be claimed as taxable income by the person receiving it.

Shared parenting relationships (where, perhaps both parents have access or physical custody over 40% of the time) creates special problems that should be addressed in separation agreements and court orders in order to maximize the benefit for both parties.

To avoid problems in the future, especially with respect to the Canada Child Tax Benefit, the agreement or order should address the issue of who will receive this credit and set out the period of access or custody for both parents. There are other tax issues that require careful consideration by both parties and sound advice upon which the parties should act.