1.4 Describe spousal support and child support payments and how they are treated for tax purposes.
Diplesh Puria
Spousal support can be defined as the monetary payment made by one spouse (generally the higher income earning spouse) to ensure that the lower income earning spouse is able to maintain the same level of lifestyle that he/she was used to living during the period of the marriage. Child support is the monetary payment which is paid by the non custodial parent to ensure the support and welfare of the child to meet his/her daily needs.
The basic idea is that Spousal support payments are deductible to the payer and included in the income of the recipient. In contrast, the child support payments have no impact on the tax of either the payer or the recipient of the child support.
Child support amounts are neither taxable nor deductible because they are considered an obligation of raising a child. Normal expenses of raising a child aren’t deductible for married or divorced couples. For example, suppose a married father takes his son to a mall to buy him a pair of shoes, he doesn’t get an income tax deduction for the pair of shoes that he buys for his son as this is considered a personal expense and there are no deductions for personal expenses. In case of a marital breakdown, the father (assuming the father pays the child support) gives the money to his ex-spouse to pay for the shoes. The amount is not deductible as the money is still being used for the personal expense of one’s child. Whereas, in the case of spousal support, it works as an additional income source for the receiving spouse so it is added to the recipient’s income for taxation purpose and deducted from the payer’s income.
The taxable and deductible portions of the support payments can be derived by the formula [latex]A-(B+C)[/latex], where [latex]A, B, C[/latex] are described in the table below:
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Amount to be included in 3(a) as Other Income ITA 56(1)(b) |
Amount to be deducted in 3(c) as Other Deductions ITA 60(b) |
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A: The total support amount received after 1996 and before the end of the year (all support payments received from the beginning of the agreement) |
A: The total support amount paid after 1996 and before the end of the year (all the support payments paid from the beginning of the agreement) |
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B: The total of all child support receivable from the start of the contract |
B: The total of all child support payable from the start of the contract |
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C: The total of all support amount received after 1996 that has been included in taxable income for the preceding years |
C: The total of all support amount paid after 1996 that has been deducted from the taxable income for the preceding year |
Note: The calculation is made from the inception of the agreement. The ‘receivable’ and ‘payable’ clauses in the ‘B’ part of the formula ensure that the childcare portion is always considered to be paid/received before the spousal support.
Interactive Content
Author: Diplesh Puria, March 2019
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Author: Ramneek Kaur, June 2019
References and Resources
- Income Tax Act, RSC 1985, c1, (5th Supp.) ss 56(1)(b), 60(b)
- Article – “Income Tax Folio S1-F3-C3, Support Payments” (Author: Government of Canada)
- Chartered Professional Accountants. (2022). The Chartered Professional Accountant Competency Map. Part 1: The CPA Competency Map: 6.3.2
“Describe spousal support and child support payments and how they are treated for tax purposes” from Introductory Canadian Tax Copyright © 2021 by Diplesh Puria is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License, except where otherwise noted.
