SPOUSAL AND CHILD SUPPORT PAYMENTS

Tax treatment:

Child support is not taxable income to the recipient. Child support payments do not give rise to any deduction or tax credit.

Spousal support is taxable income if payments are periodic and made under a court order or written agreement. Spousal support payments are deductible only if they are taxable to the recipient.

If a person is required to pay both child and spousal support, but the full amount is not paid, then the income/deduction amount for spousal support is equal to the actual amount paid and received, minus the amount of child support that was required to be paid and received.

To claim a deduction, the order or agreement for support must be registered with the CRA using  Form T1158.^[1]

Meaning of ‘written agreement’, and requirement to register with CRA

There is no definition of “written agreement” in the Income Tax Act. A formal agreement with signatures may not be necessary.^[2]  An exchange of emails may be sufficient provided they show a true promise and obligation to pay support, not just a loose arrangement whereby one spouse hopes to pay and pays only if they can.

UFile steps if spousal support was paid or received:

1. In Interview setup, go to Parents and children and check the box for Alimony or support payments.
2. Click the plus sign beside the appropriate option and complete the required sections.

For support payments received, UFile requires two entries:

• “Total support payments received in [tax year] (including the non-taxable child support expected for [tax year])”
  → Enter the total amount of spousal and child support actually received. Note that UFIle suggests that the total should include the child support expected, but UFile is incorrect. Only the actual amount should be included.
• “Non-taxable child support expected for [tax year]”
   → Enter the amount of child support that was supposed to be received, regardless of whether it was actually paid.

Example:
Suppose a wife was owed $6,000 in spousal support and $4,000 in child support. The husband actually paid $7,500 in total. In this case:

• Taxable income is $7,500 – $4,000 = $3,500
• UFile will report $7,500 on Line 12799 and $3,500 on Line 12800.

UFile steps if spousal and/or child support was paid:

1. In Interview setup, go to Parents and children and check the box for Alimony or support payments.
2. Click the plus sign beside the relevant option and complete the required sections.

For support payments made, UFile requires two entries:

• “Total amount of support payments made in [tax year]”
  → Enter the total of both spousal and child support actually paid.
• “Non-deductible child support payable for [tax year]”
  → Enter the amount of child support that was required to be paid, even if some or all of it was not actually paid.

Example:
Suppose a husband was obligated to pay $6,000 in spousal support and $4,000 in child support. He actually paid $7,500 in total. In this case:

• His deductible amount is $7,500 – $4,000 = $3,500.
• UFile will report $7,500 on Line 21999 and $3,500 on Line 22000.
• The husband cannot assert that $6,000 of the $7,500 was spousal support.

Special situations requiring additional guidance before completing UFile:

• A spouse paid back-support (i.e. amounts owed for a previous tax year).
• Lump sum payments were made in advance of a court order or written agreement.
• A spouse was in child support arrears prior to tax year.
• Payments are made to or from a non-resident.

Consequences of paying child support:

A parent paying child support cannot claim the eligible dependant credit for that child.^[3]  But if the parents pay child support to each other, one parent may claim the credit.^[4]

If the child qualifies for the Disability Tax Credit, the unused amount cannot be transferred to a parent who is paying child support.

References:

• Income Tax Folio S1-F3-C3, Support Payments
• CRA webpage - Support payments
• CRA webpages for Lines 12799 and 12800 and Lines 21999 and 22000.
• Income Tax Act, reporting income: s.56(1) and 56.1(1)
• Income Tax Act, s.56.1(4) - meaning of “child support payment” and “support payment”.
• Income Tax Act, deduction: s.60(b)
• Income Tax Act, s.118(5) - credits.
• Disability tax credit transfer