Child Support Tax Guide

Current Tax Rules

Post-May 1997 Agreements

• Child support is NOT deductible by payer
• Child support is NOT taxable to recipient
• No tax reporting required
• Full amount goes to support child

Why Tax-Neutral?

• Simplified system
• Money meant for children's benefit
• Removes tax dispute from support calculations
• Federal Child Support Guidelines set amounts

Pre-May 1997 Agreements

Old Rules May Apply If

• Agreement made before May 1, 1997
• Never modified since
• No written election to use new rules

Under Old Rules

• Payer could deduct child support
• Recipient had to report as income
• Same treatment as spousal support today

Child vs Spousal Support

Key Tax Differences

Priority Rule

• Child support has priority
• If paying both, child support paid first
• Only excess over child support is spousal
• Important for mixed payments

Federal Child Support Guidelines

How Amounts Are Calculated

• Based on payer's gross income
• Number of children
• Province of residence
• Standard tables provide amounts

Special Expenses (Section 7)

• Childcare
• Medical/dental expenses
• Educational expenses
• Extracurricular activities
• Shared based on incomes

Impact on Government Benefits

Child Support Received

• Does NOT affect Canada Child Benefit
• Does NOT affect GST/HST credit
• Not counted as income anywhere
• No reporting on tax return

Child Support Paid

• Does NOT reduce payer's income
• No benefit to payer's CCB
• Payer's income stays same for benefits

Shared Custody Situations

40%+ Time With Each Parent

• Offset calculation may apply
• Both parents calculate support
• Higher earner pays difference
• Still tax-neutral

Split Custody

• Each parent has custody of different children
• Cross-payments calculated
• Net amount paid
• Same tax treatment

Documentation Best Practices

Keep Records Of

• Court order or agreement
• Payment records (bank statements)
• Receipts for special expenses
• Income information exchanges

Why Documentation Matters

• Proves payments made/received
• Distinguishes child from spousal support
• Supports variation applications
• Protection in disputes

Variations and Modifications

When Support Changes

• Income changes significantly
• Custody arrangements change
• Child's circumstances change
• Child becomes independent

Tax Implications of Changes

• Modified child support still tax-neutral
• Retroactive payments not taxable
• Arrears payments tax-free

When Child Support Ends

Typical End Points

• Child turns 18 (basic)
• Child finishes full-time education
• Child marries
• Child becomes self-supporting

University Students

• Support often continues through school
• Agreement should specify
• May include tuition/living expenses
• All still tax-neutral

Special Situations

Undue Hardship

• Guideline amount may be varied
• Unusual expenses (debt, other children)
• Must compare household standards
• Tax treatment unchanged

High Income Earners ($150,000+)

• Tables provide amounts up to $150,000
• Above that, court discretion
• May use percentage of income
• Same tax rules apply

Self-Employed Parents

• Income determined for guidelines
• May include business income additions
• Corporate income may be attributed
• Support remains tax-neutral

Enforcement and Arrears

Enforcement Agencies

• Family Responsibility Office (Ontario)
• Maintenance Enforcement Program (other provinces)
• Garnishment of wages
• License suspensions

Arrears Tax Treatment

• Back payments still tax-neutral
• Interest on arrears not taxable
• No deduction for payer

Common Misconceptions

"I Can Deduct Child Support"

• Not since May 1997 (new agreements)
• Only spousal support is deductible
• Check your agreement's commencement date

"It Counts as Income for Benefits"

• Child support does NOT affect CCB
• Does NOT count for GST/HST credit
• Spousal support DOES count

"I Need to Report It Somewhere"

• No tax return line for child support
• Neither payer nor recipient reports
• Keep records but no CRA reporting

Related Tax Considerations

Who Claims the Child?

• Dependent credits separate from support
• Primary caregiver usually claims
• Can agree to split some credits
• See CRA guidelines on shared custody

Medical Expenses

• Either parent may claim
• Whoever pays can claim
• Cannot double-claim same expense