When you resolve a family law dispute, there will be tax considerations that come into play. At the Gene C. Colman Family Law Centre, our Toronto family law and taxes lawyers can help you with the tax implications brought on by divorce, child custody and spousal support proceedings. It is important to protect your interests and ensure that you are not caught by surprise by sudden changes to your finances.
We are available to answer your questions about how your family legal matter may impact your taxes. Contact our Ontario family law lawyers online or call 1-888-389-3099 to schedule a meeting to discuss your situation.
Shared Custody and Benefits Entitlement
Prior to July 2011, only one person could receive the Canada Child Tax Benefit and the Universal Child Care Benefit each month, and the child component of the GST/HST credit each quarter, with respect to a qualified dependent. This created a problem for parents who share custody of a child. As of July 2011, legislation was amended to recognize both shared custody parents as "eligible individuals" in the same month. Now, two people are eligible to receive the Canada Child Tax Benefit, the Universal Child Care Benefit, and the GST/HST credit amounts, as long as they would each be eligible to receive amounts under the Canada Revenue Agency existing shared eligibility policy. This policy applies when a child is living more or less equally with two people who live separately. The benefits will be split equally between the two people, with each receiving one-half of each monthly installment. The child component of the GST/HST credit would also be shared equally - each individual will receive one-half of each quarterly installment. [For Government of Canada information re the Canada Child Tax Benefit see: http://www.cra-arc.gc.ca/bnfts/cctb/menu-eng.html. For government information re the Universal Child Care Benefit see: http://www.cra-arc.gc.ca/bnfts/uccb-puge/menu-eng.html. For government information re shared custody see: http://www.cra-arc.gc.ca/bnfts/cctb/fq_lgblty-eng.html]. It is important to note that shared custody arrangements must be spelled out in advance in the governing document, be it a Separation Agreement or court order. Our Toronto divorce lawyers will assist you to reach a fair resolution that will take into consideration the tax credits.
Single Parents and the Universal Child Care Benefit (UCCB)
Another change was made to the Universal Child Care Benefit (UCCB) for single parents. The UCCB provides families with $100 per month for each child below six years of age. Prior to July 2011, in a two-parent family, the UCCB was included in the income of the lower-income spouse. In a single-parent family, however, the UCCB was included in the income of the single parent. The result was that single parents pay more tax on the UCCB, because the UCCB is taxed at his or her marginal tax rate. A single-parent family, earning the same income as a two-parent family, therefore paid more tax on the UCCB than the two-parent family.
As of July 2011, a single parent can choose to claim the benefit amount received in his/her own income; or, the UCCB can be included in the tax return of the dependant for whom an Eligible Dependant Credit is claimed. The single parent is also able to include the UCCB amount in the income of one of the children for whom the UCCB is paid, if the parent is not able to claim the Eligible Dependant Credit. [For Government of Canada information re Single Parents and the Universal Child Care Benefit see: http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/ncm-tx/rtrn/cmpltng/rprtng-ncm/lns101-170/117-eng.html].
At the Gene C. Colman Family Law Centre, our lawyers will let you know which option is best for you.
Eligible Dependent or Equivalent-to-Spouse Tax Credits
The Income Tax Act grants a tax credit to individuals who support a low-income spouse. It also grants a similar credit to a divorced individual who supports a relative, including a child. However, only one spouse can claim the credit for any individual child, and if the other spouse objects, no one can claim the credit. Until the law is changed, we can work with you to ensure that the benefit of this credit is not lost.
Call for a Consultation at an Ontario Tax Credit and Separation Agreement Law Firm
The tax laws in regard to family law issues do change. We stay on top of these changes to the law and will do everything we can to ensure that you benefit from tax planning following a divorce. Contact our Toronto family law and taxes lawyers online or call 1-888-389-3099 for an initial consultation to discuss your case.