The end of April is fast approaching, and that means if you owe the government taxes, then you must file your personal taxes no later than April 30. With that in mind, here are a couple of articles from The Globe and Mail online that is relevant to those who are recently separated or are in the process of getting divorced.
Getting Divorced? Make sure to let the taxman know
By Alexandra Posadski
The Canadian Press
Published April 17,2015
Your marital status has a major impact on your tax returns, and failing to report any changes could cost you. Certain tax credits are calculated based on total household income. If you have recently separated from your partner, your household income has likely gone down, and you could be entitled to tax credits you were not able to receive before. For tax purposes, you are considered separated once you have been living separately and apart for more than 90 days. Child support is tax-free for the recipient, and is not tax deductible by the payer. Spousal support, on the other hand, is tax deductible to the payer, and taxable to the recipient. Ensure you have proper documentation, such as a court order or a written agreement, to prove that you are paying support in case you get audited. Filing taxes can be complicated after a separation or divorce. An example is when there are joint assets, such as income generated from shared investments, that need to be to divided. Even if you always do your own taxes, it may be worthwhile seeking professional advice to help you work through some of the details.
A marriage breakdown comes with tax consequences
By Tim Cestnick
Special to The Globe and Mail
Published October, 2014
If you are separated, and/or are going through a divorce, take the time to understand the tax implications of splitting up. The most important tax issues to consider are:
- Marriage status – common-law partners are considered married if they have been living together in a conjugal relationship for at least 12 months, or they have a child. Legally, your marriage officially ends when you obtain a divorce. However, for tax purposes, your status as married is considered to have ended when you have been living separately and apart for 90 days or longer (this seems important, so for more information, the following link will take you to the appropriate place on the CRA website: http://www.cra-arc.gc.ca/bnfts/mrtl/menu-eng.html )
- Dividing up assets – generally, you will be able to transfer assets tax free at the adjusted cost base.
- Sharing pension assets – Canada Pension Plan credits can be split without any immediate tax, and other pension assets are generally split without tax.
- Tax on support payments – spousal support payments are deductible to the payer, and taxable to the recipient. Child support payments are tax free to the recipient, and not deductible by the payer.
- Deductibility of legal fees – legal fees are generally deductible if they relate to collecting late support payments, establishing a right to support, or increasing your support. They are not deductible if you are the payer of support, or if the fees relate to child custody or visitation issues.
- Personal tax credits and deductions – only one spouse can claim the dependant amounts for a particular dependant. You can claim child-care expenses incurred by you for the period you child resided with you. A student can transfer tuition, textbook, and education credits to either parent, but not a portion to both. This will require an agreement between you and your spouse.
- Universal child care benefit – if one parent has custody of the children, the UCCB will be paid to that parent. With shared custody, you can apply to have the payment split equally between the two of you.