After a divorce, an Ontario parent may have questions about the court-ordered support and the tax implications of such payments. Under federal family law, the two support types include child support and spousal support. The tax treatment of each is different, and the Canada Revenue Agency’s definition of each type must be understood.
Child support comprises more than just that ordered by the court; it includes written agreements and other payments designated for the care of the child, paid to the child or a recipient. The CRA regards the entire amount of such payments as child support. In contrast, spousal support covers only court-ordered payments or those paid according to written agreements. It applies to both legally married and common law spouses.
When it comes to the tax treatment, the recipient need not report child support payments as an income, nor does the payer have to report such payments on income tax returns. In other words, child support payments are not taxable nor are they deductible. However, spousal support is regarded as an income for the recipient, and it is therefore taxable. For the payer, it is a deductible expense.
Parents in Ontario whose divorces or common law relationships ended before May 1997 may know that different tax laws were in place at the time. However, any applications for variations after that date may be subject to the new laws. Answers to questions about the tax implications of support payments stipulated by both court-ordered and written agreements are available from an experienced family law lawyer. Source: FindLaw Canada, “Tax rules for child and spousal payments“, Miriam Yosowich, Accessed on June 2, 2017