When a marriage ends, just about every aspect of the spouses’ respective lives will change. There may be a change in residence, schedule and certainly in personal finances following a divorce. There will also be changes to both parties’ tax situations. There are special tax implications every divorcing person in British Columbia should know about.
The Canada Revenue Agency needs to know when a couple’s marital status changes, as this affects many aspects of a person’s taxes. For example, if the household income drops, which it typically does, that could change the amount of the GST/HST credit, and child tax benefits. Additionally, there may be provincial tax benefits that are affected.
Who has custody of the children will also figure into the new tax picture. A single parent can claim the Eligible Dependent Credit, but the two parents must agree on which party claims it. This may be something to put in a settlement agreement to avoid arguments in the future. The Canada Child Benefit will go to whichever parent has primary custody. If there is shared custody, then each parent gets half of the CCB.
Child and spousal support payments both made and received will have to be noted on each parent’s next tax return. Any legal fees paid specifically for the arrangement of support may be claimed on a person’s taxes. The lawyer can provide a letter that details which part of the fees covered support orders.
For many reasons, a divorce can sometimes be a confusing process. However, it is not necessary to face it all alone. A man or woman divorcing in British Columbia may greatly benefit from working with an experienced lawyer who can answer his or her questions and offer advise on complex issues.
Source: ca.finance.yahoo.com, “Tax tips for separated and divorced parents“, Danielle Boudreau, April 24, 2017