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How child support and custody impacts separated parents' taxes

There are many things parents need to consider after separating from their significant other. Among the many considerations are changes to one's tax status. The tax situation of a newly single parent can vary greatly depending who maintains child custody, who is paying child support and how child care expenses are divided between parents. Here are a few things Alberta parents should consider if they are newly separated come tax time.

A separation can impact someone's tax situation if they are ending a marriage, ending a common-law relationship or ending a relationship with the parent of one or more shared children. For tax purposes, a couple is considered separated if they have spent at least 90 consecutive days living apart. It is a good idea to contact the Canada Revenue Agency (CRA) following the 90-day period if the cohabiting status has changed. 

One of the questions the CRA may broach if the cohabiting relationship changes is who should receive the Canada Child Benefit. It is generally assumed that the maternal parent is the beneficiary of the benefit, but the CRA will also consider other factors including custody agreements. In some cases, grandparents will be custodial parents and will therefore the issued the benefit. If the benefit is wrongly issued to the wrong parent, it is a good idea to contact the CRA right away to remedy the situation.

There are many other taxation issues that can arise in a divorce. For example, child support is not tax deductible by the payer, although some spousal support payments may be tax exempt for the person paying. These specific situations should be part of the discussion during the family law process, and can be discussed with an Alberta to avoid surprises come tax time.

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