Divorce triggers several tax consequences you need to understand. Spousal support (alimony) is taxable income to the recipient and deductible by the payer if it meets CRA criteria. Child support is not taxable income and not deductible. You may lose access to spousal income splitting strategies, and registered accounts like RRSPs and TFSAs often require division between spouses. Most importantly, your marital status changes on December 31 of the year of divorce, which affects tax credits, benefits, and filing status for that tax year and beyond. If you pay spousal support, this CRA rule may apply to you: payments are deductible from your taxable income, provided they meet specific legal requirements. The payments must be made under a court order or written agreement, ongoing (not a lump sum), and paid directly to your spouse. If you receive spousal support, it counts as taxable income on your tax return. You will report this on Line 12700 of your T1 General form. Child support payments do not follow these rules; they are neither deductible nor taxable, regardless of who pays or receives them. RRSPs and TFSAs owned by either spouse are typically divided during divorce proceedings.
No, child support is not taxable income to the recipient and not deductible by the payer. This applies to all child support, whether paid under a court order or written agreement. Only spousal support follows tax deduction and inclusion rules.
Yes, transfers of RRSPs between spouses as part of a divorce settlement can occur on a tax-deferred basis if done according to CRA rules. The receiving spouse will eventually pay tax when they withdraw the funds, but no immediate tax is triggered at transfer.
Only one parent can claim the Dependent Amount and Canada Child Benefit per child in a given tax year. You and your ex-spouse must agree on who claims each child, or alternate years. If custody is unclear, the primary caregiver (who lives with the child most of the time) typically claims them.
Your marital status on December 31 determines your eligibility. If you were married for any part of the tax year, you cannot claim the Spousal Amount Credit. However, you may qualify for other credits like the Eligible Dependent Amount if you support a dependent child.
Your GST/HST Credit is recalculated based on your individual family net income, not your spouse's. This often increases your credit in the year of divorce and the following year because your household income is now lower.