Tax ramifications associated with divorce

On behalf of Peterson Stark Scott posted in Divorce on October 16, 2019.

There are tax consequences associated with the end of a marriage. Some British Columbia couples are not prepared for the financial consequences after having made the decision to divorce and that may cause even more stress. According to the Canada Revenue Agency (CRA), a couple is considered to be separated if they have lived apart as a couple for at least 90 days and when separated the CRA will tax a resident as an individual.

Those taxed as individuals aren’t able to claim certain social benefits as they did if they claimed as a couple or family. Those include the Canada Child Benefit, the Canada Workers Benefit or the GST/HST credit. Whomever has the children the most is the individual who can claim these benefits — in other words, whomever has primary custody. When parents share custody 50/50, the CRA lets parents share the claims for the benefit year, which is from July to June.

Other issues a couple needs to discuss relating to their individual tax filings are the division of assets, support payments for children and former spouses and attribution rules. Some couples may not be familiar with attribution rules, which deal with the transferring of assets from one spouse to another during the marriage. Income earned on those assets must be reported by the person making the transfer.

There are many things to consider when the decision has been made to divorce. A British Columbia lawyer may be able to help a client to decipher which issues are most important and should be seen to first. Divorce has the potential to be financially disastrous, but with a lawyer’s guidance, the outcome might not be as overwhelming.

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