If you are required to make support payments it is important that you understand how these fit into your tax obligations. It is always difficult when going through a separation to determine how this may now have an effect on your taxes.
First, there are two types of support payments. There is the type where you have been ordered by the courts or you have a written agreement to pay a sum of money on a regular basis to support a child. This is child support. Or you may have a court order or written agreement that is for spousal support which applies to your spouse or common law partner. Then it could be that you are required to pay both. For a better understanding of the terminology that applies to these conditions check out our recent article on support payment terminology this, or review the CRA guide.
Not all payments made are considered support payments. There are certain conditions that have to be met in order for the payments you are making to qualify as such.
· These payments have to be based on a court order or written agreement. These have to be recognized by the CRA as a competent tribunal that comes under the provincial regulations or a formal court. You may already have a written paternity agreement that you filed with the court, but this is not recognized by the CRA.
· You must be living apart from your former spouse or common in law partner if this is who you are making your payments to, and the separation must be as a result of relationship breakdown.
· Support payments may be for the maintenance of the spouse or common law partner, the child of the person receiving the payment, or both. The receiver of the payment uses their own judgement as to how the support money is used.
· It is important that you understand the nature of your payments if you are making them on a periodic basis as there are specific regulations pertaining to allowance and periodic payments.
· Usually the payments are made to the spouse or the common law partner but there are some situations under a court order where the payments are made to a third party.
While these are the basic rules and criteria for support payment there are some additional situations that may indicate support payments.
If you are in a position where you are making payments such as these it would be a good idea to have a professional like us here at Toronto accountant assist you with your tax return. Just contact us and we would be happy to provide this service to you.
