Support payments are monies that you receive or pay as an allowance, on a regular or periodic basis for the upkeep of the recipient, the child or both.
The Canada Revenue Agency recognizes two types of support payments: child support and spousal support.
- Child support: For child support CRA casts a wide net. It means not only child support payments ordered to pay or made through an agreement but all support payments not identified in a court order or written agreement as being for the recipient’s upkeep. If the court has ordered, or there is a written agreement, which designates a universal amount of support to be paid to the recipient or a child, then the full amount is considered child support.
- Spousal support: this definition encompasses both legally married spouses and common law partners. The support payments have to be designated by the court order or a written contract as solely support for the recipient.
What is a recipient?
CRA defines a recipient as an individual who gets support payments from the payer. The support payments must have been made through a written agreement or a court order.
The definition of payer includes the following people:
- The payer's current or former spouse or common law partner; or
- The parent of a child of whom the payer is a legal parent.
The type of tax treatment applied for making or receiving such payments depends on the kind of support payment it is and the date these orders or agreements were made.
Tax rules for orders made before May 1997
For both child support payments and spousal support payments made through written agreements or court orders before May 1997, similar rules applied in that these payments were deductible to the payer and taxable to the recipient.
For these type of payments for which a court order or written agreement was made in May 1997 and forward, the below rules apply.
Spousal support payments are still deductible by the payer and taxable to the recipient. These two conditions have to be met:
- All payments for child support are fully paid for the current and previous years; and
- The order or agreement clearly specifies the amount to be paid for the spouse or common-law partner.
Different tax situations apply to child support payments.
For written agreements or court orders made after April 1997
In general these payments do not have to be reported on in income by the recipient nor are they deductible to the payer. There may also be automatic changes in the amount of support if an order or agreement was made after April 1997.
The four exception rule for child support payments made before May 1997
As was already outlined above, child support payments were deductible by the payer and taxable by the recipient if the order or agreement was made before May 1997.
However, there are four situations where the new rules apply, even if the agreement or order was made before that date:
- If a court order or written agreement was made before May 1997 but modified after April 1997, then the May 1997 tax rules apply;
- There may be an existing order or agreement that existed before May 1997. However, if a new order or agreement was made after April 1997 and the total amount of child support made to the recipient has changed, then the new tax rules apply for both orders and written agreements made.
- If there is a court order or written agreement that exists before May 1997 but that court order or agreement says that child support payments after May 1, 1997 will not be tax deductible or taxable.
- You can elect to have the new tax rules in place, even if you have a court order or written agreement for child support in place since before May 1997. However, there is a catch: both the payer and the recipient have to agree to this arrangement and complete and sign a form to attest to that. Once made, this election cannot be withdrawn.
If you have a court order or have a written agreement in place which dates before May 1997 and want to vary it, or you have issues with child support and/or support payments after 1997, consult an accountant or lawyer.
Support Payments Canada Revenue Agency
Can You Claim Child Support Payments on your Taxes in Canada?