Child Support

When a child’s parents belong to separate households, one (or sometimes both) parent(s) often make child support payments to the other parent to provide for the care of the child. This article focuses on the tax impact of child support payments made pursuant to a court order or written agreement dated after April 30, 1997, which today represent the majority of such payments.

Child support payments made pursuant to a court order or written agreement dated after April 30, 1997 are generally not tax deductible for the payer, meaning that they do not reduce the taxable income, or tax payable, of the payer. Furthermore, these child support payments are not taxable in the hands of the recipient, meaning that they do not increase the taxable income, or tax payable, of the recipient. However, child support payments can have other tax implications, two of which are discussed below.

Example 1

Fred and Wilma separated on January 1, 2010, and Wilma has custody of their child. Pursuant to a court order, Fred pays Wilma $1,000 per month in child support, and $500 per month in spousal support, for a total of $1,500 per month in support payments.

Up to December 31, 2010, Fred pays all of the amounts required by the court order, namely $12,000 in child support and $6,000 in spousal support, or $18,000 in total support payments. Fred is entitled to deduct $6,000 for spousal support payments in 2010, and Wilma has to include $6,000 in her income. No deductions or inclusions are made for the $12,000 in child support payments.

In 2011, Fred only pays Wilma $14,000 in total support payments. The Income Tax Act deems the $14,000 in support payments to be broken down as follows:

$14,000 total support payments made
-$12,000 child support payments for 2011 required by court order
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$2,000 spousal support payment made

In situations where both parents are eligible, the parents have to agree which one of them will claim the credit, as only one credit can be claimed per child. If both parents claim a credit for the child, neither parent will receive the credit.

Example 2.

Mike and Fay have joint custody of their son Bobby. Pursuant to a 2010 court order, Mike pays child support and spousal support payments to Fay. Fay can claim a tax credit for Bobby, but Mike cannot.

Example 3.

Mike and Fay have joint custody of their son Bobby. Pursuant to a 2010 written agreement, Mike pays spousal support payments to Fay, but does not pay child support. Either Fay or Mike is permitted to claim a tax credit for Bobby but not both.

Example 4.

Mike and Fay have joint custody of their son Bobby. Pursuant to a 2010 written agreement, Mike pays child support payments to Fay in some months, and Fay pays child support payments to Mike in other months. Either Fay or Mike is permitted to claim a tax credit for Bobby but not both.

Example 5.

Mike and Fay have joint custody of their son Bobby and their daughter Jenny. Pursuant to a 2010 written agreement, Mike pays child support payments to Fay for Bobby, and Fay pays child support payments to Mike for Jenny. Only Fay is permitted to claim a tax credit for Bobby, and only Mike is permitted to claim a tax credit for Jenny.

If you need tax advice relating to child support payments, or if you pay or receive child support pursuant to a court order or written agreement dated prior to May 1, 1997, contact our office to arrange a consultation with one of our tax lawyers.

Disclaimer:
"This article provides information of a general nature only. It may no longer be current. It does not provide legal advice nor should it be relied upon. If you have specific legal questions you should consult a lawyer."