The end of April is fast approaching. If you owe the government taxes, then you must file your personal tax return by April 30. If you are recently separated or are in the process of getting divorced, then there are tax consequences. Therefore, here are a couple of articles from The Globe and Mail that explain what some of the tax consequences are.
Getting Divorced? Make sure to let the taxman know
By Alexandra Posadski
The Canadian Press
Published April 17,2015
Bottom line:
If your marital status has changed, then report it to the CRA. If you don’t, it could cost you.
Certain tax credits are calculated on total household income. Therefore, if you recently separated from your partner, then your household income will be lower. 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 90 days or more.
Child support is tax-free for the recipient and is not deductible by the payer. However, Spousal support is deductible by the payer and is taxable for 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. For example, if you and your partner generate income from shared investments, then the income must be divided accordingly.
A marriage breakdown comes with tax consequences
By Tim Cestnick
Special to The Globe and Mail
Published October, 2014
Bottom line:
If you are separated, and/or are going through a divorce, then take the time to understand the tax implications of splitting up. 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 if they have a child. Legally, your marriage officially ends when you obtain a divorce. However, for tax purposes, your marriage is considered to have ended when you have been living separately and apart for 90 days or longer.
- Dividing up assets – in general, you are allowed to transfer assets tax free at the adjusted cost base.
- Sharing pension assets – Canada Pension Plan credits can be split without immediate tax; other pension assets are generally split without tax.
- Tax on support payments – spousal support payments are deductible by 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 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 your 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.
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