Reporting Child and Spousal Support Payments

Evelyn Jacks

According to the Vanier Institute, the pandemic that began a year ago may have a significant effect on family life in Canada, particularly for those who experienced unemployment as part of the equation.  Families who may have separated or divorced in 2020 will now have significantly altered income tax profiles.  Here is what you need to know to ensure support payments are properly reported.  

Support payments may be made for spousal support and that is taxable.  In addition, payments may be made for child support, which under current agreements is not taxable. Taxable support payments received must be included on line 12800.

Spousal support is taxable to the recipient under S. 56.1(b) of the Income Tax Act and deductible to the payor under S. 60(b) if certain conditions are met:

• The amounts paid are pursuant to a written separation agreement, judgment, order or decree
• The parties were separated and living apart when the payments were made
• The parties continued to live apart for the remainder of the year
• The payments were made to the former spouse or a third party for the maintenance of the spouse
• The payments were made on a periodic basis (lump sum payments are not deductible)
• The amount deductible by the payor and taxable by the recipient is the least of
  • The amount required to be paid under the agreement, judgment or order
  • The amount actually paid

Spousal support includes support for a former spouse or common-law partner as well as support for the parent of the taxpayer's child. If support payments are in arrears, all payments are deemed to be child support payments until all child support payments are brought up to date. Once child support payments are up-to-date, additional payments required are considered to be for spousal support.

The recipient of any taxable support payments should be sure to understand the outcomes of a balance due in 2020: if amounts owing exceed $3,000, quarterly instalment payments will be required in September.  It’s best not to fall behind in paying the April 30 balance due, for obvious reasons.

The recipient may also qualify to claim one child as an “eligible dependant” which is an “equivalent to spouse” amount.  The amount of Canada Child Benefit receivable in July will also be determined by filing a 2020 tax return.  A $300 additional payment per child will be made when net income is less than $120,000; $150 per child if net income is above that. 

Be sure to see a DFA-Tax Services Specialist™ for help and tax planning guidance in these cases.