The Confusion Between Support Payments and Taxes

Support payments and taxes
 It has been generally said that taxes is not a topic of conversation that most people want to get into, yet on occasion it does happen.  This is when the confusion about how our tax system relates to the individual can really set in.


For example, one individual who is paying child support states that he can claim this as an expense, while another individual says he is not allowed to.   What’s up with that?   Are one of them doing something wrong?   Actually maybe not, and here is why.


Currently the CRA no longer allows child support payments as a deduction, nor do they include it in income, although they did at one time.   Still, you have to report paying or receiving support payment on your tax return.


If there are previous court orders still in place before the tax rules concerning this changed then it could be that you are required to claim or deduct the payment made for support.   So you can see how the predicament of the two individuals in our above scenario could take place.


The changes to the tax law took place in May 1997.   Before this both support payments for the children and for the spouse were deductible and taxable.   After this though, the rules concerning the child support changed.


Depending on the situation there may be rules in place that dictate that orders and agreements that were in place before 1997 must now adhere to the current rules.


Once again, nothing is straight forward when it comes to the tax laws so if you happen to be an individual that is involved in receiving or paying child support or spousal payments in accordance with a court ruling or agreement prior to 1997, it would be well worth your while to have your taxes completed by an experienced accountant.   These experts will know whether you tax obligation regarding this matter is applicable to the current laws, or remains under the prior ones.


If it turns out that the old laws are still applicable to you but both parties agree to having the current laws applied then this may be achieved through filing Form T1157 which is the Election for Child Support payments.


There are specific areas on your tax return where the information regarding your payment or receiving of child and spousal support is entered.   What you enter in the various sections can be a little difficult to figure out, especially if these payments are made or received as a combined sum.   You have to determine which of the amount relates to child support and which relates to spousal support.


This can be a real hassle for either party, but by putting this potentially complex tax matter into the hands of a quality Toronto accountant like Sam Seidman, you will no longer have to second guess as to whether you are completing your tax return properly according to the law.


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Sam Seidman, CPA, CA, LPA
629 Sheppard Avenue West
Toronto, Ontario
M3H 2S3

Telephone: (416) 398-1700
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Chartered Professional Accountant, Chartered Accountant, Licensed Public Accountant


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