Deciding to split is hard enough as it is, WITHOUT the stress and worry of what to do come tax season. Fear not, ABB’s got you covered! Check out our list of things that you’ll need to consider this spring.
#1: Proof of Separation
The taxpayer has the responsibility of proving separation to CRA. This is relevant for a number of deductions, non-refundable tax credits, benefits etc. that you may be entitled to, including:
Working Income Tax Benefit
Canada Child Tax Benefit
Eligible Dependent Credit
Child care expenses
Want to learn more about validating your eligibility for benefits and credits? Check out CRA’s overview here: https://www.canada.ca/en/revenue-agency/services/child-family-benefits/validating-your-eligibility-benefits-credits.html
#2: Spousal Support
First, let’s talk about what qualifies as “spousal support” payments. Spousal support payments must have the following characteristics:
The payer and the recipient mist be living separate and apart due to a relationship breakdown at the time the payment was made.
Payments are for the maintenance of the recipient
The recipient can decide how the money will be spent
The payments are made periodically (Ex. Quarterly, monthly, weekly)
The terms and schedule of payments are set
Determining Factors for Spousal Support Entitlemen
The Supreme Court of Canada in Bracklow v. Bracklow identified three bases for spousal support entitlement: contractual, compensatory, and non-compensatory, Contractual support would be support based on any agreement that existed between the parties. Compensatory support is meant to reimburse the spouse for choice’s they made during the marriage that required them to sacrifice professional success in favour of the marriage. Non-compensatory is based on the need of the spouse, determined according to the economic interdependency created during the marriage. The longer the marriage, the greater the amount of interdependency, and the longer that may be required to unravel it.
There are generally two different methods used to determine both the amount and duration of spousal support: the with child support formula, and the without child support formula. Regardless of the formula applied, both calculations originate from s. 15.2 of the Divorce Act. The Divorce Act sets out, that in making a spousal support order the Court shall consider the means needs and other circumstances of each spouse