4 ways your tax returns change when you file as a divorced couple

December 12, 2014

If you're recently divorced, it's important to understand how this will affect your tax return.

4 ways your tax returns change when you file as a divorced couple

Now that you are closing a chapter in your life, there are a few things you should know when filing your taxes as a divorced couple.

  • To be clear, you don’t need to be officially divorced in order to change your status on your taxes.
  • You are considered separated if you cease to cohabitate for over 90 days.
  • At this point, you are separated and will be taxed as an individual, so your income and asset will be treated as separated.

Inform the Canada Revenue Agency

If your marital status changes you should let Canada Revenue Agency because it may affect your benefits.

  • When you’re ready to file your taxes, there are some rules you need to follow, so take a deep breath and get organized to file your taxes.
  • There are a few things you’ll need to consider, so that you file correctly.

1. Support payments

  • If you receive support payments, those payments are taxable.
  • If you pay support, you may claim deduction for the support.

In the year of the separation or divorce, the person who pays support can claim the deduction or the amount of support. If you want to avoid paying taxes, you can receive a lump sum; these payments are not deductible or taxable.

Beware during tax time; some people are unprepared for the amount of taxes they need to pay on support payments received.

  • You can always set up installment payments, if this is the case.
  • Make a point to discuss before the divorce is finalized.

2. Child support

During a divorce, there are sometimes children involved. When you have children in the picture, things can get complicated quickly. Have the best intentions in mind, and make sure child support payments are handled properly.

  • Child support payments are not taxable to the recipients of these payments.
  • Those making child support payments cannot claim the deductible.
  • For tax purposes, any support stipulated in agreements or court orders is deemed to be child support if not identified as spousal support.

3. Splitting up your assets

There are no attribution rules for assets transferred because of your separation, as long as the couple stays separated.

  • Whoever is the owner of property after separation is responsible for taxes on the property.
  • So make sure you've accounted for those additional taxes if you gain ownership of the home or any other property.

4. RRSP considerations

  • Any spousal RRSP contributions will no longer be allowed after your separation.
  • The funds in your RRSPs can be rolled over to ex-spouses according to separation agreement, judgment, court order or decree.

How an accountant can help

While filing your taxes can seem like another overwhelming experience, you may benefit from hiring the services of an accountant. Your accountant can help you with any tax and financial concerns you may have.

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