If this is the first tax season where you are filing your income tax return as divorced, and you have custody of your child(ren), then there are a few things that you will need to know to ensure that you get it right;
Your Marital Status
If you separate or divorce after December 31st, you will still have to file your income tax return as married. Until your divorce has been finalized, you will be required to file your tax return as “separated” and then as soon as your divorce agreement has been finalized, you can file your tax return as “divorced.”
Once your marital status changes, it’s important to notify the Canada Revenue Agency (CRA). If you’re recently divorced, you must notify the agency by the end of the month after the month in which you divorce was finalized. For example, if you divorced in November, you’ll need to let CRA know by the end of December. You can notify the agency in one of three ways: you can update your marital status through My Account on the CRA website; you can call CRA’s toll-free phone number 1-800-387-1193; or, you can complete and send in Form RC65, Marital Status Change.
Your Legal Fees
If you paid legal fees to collect child or spousal support, you can claim those on your tax return.
You may also claim fees associated with collecting late support or attempts to increase support payments.
The legal fees paid to your lawyer, however, to prepare the separation or divorce agreement or establish custody are not tax deductible.
If you are receiving financial support from your former spouse (spousal support or child support), you may be required to claim it on your tax return. If you’re receiving spousal support (commonly referred to as “alimony”), you must claim it as taxable income on your tax return.
You must determine what amount of the total support is taxable. Since child support in most cases is non-taxable, enter the amount of spousal support only.
Claiming Tax Credits
Filing your tax return will be different than in past years when you’re recently divorced with child(ren). The importance of letting the CRA know of your change in marital status right away is to determine if you are entitled to any of the following: Canada Child Benefit, GST/HST credit and provincial benefits. The good news is, since your ex-spouse’s income is no longer included when determining these benefits, there’s a good chance you’ll receive an increase in government benefits as long as your income stays the same.
As a single parent of a minor child, you may be entitled to claim your child as an “eligible dependent,” often referred to as an “equivalent to spouse” credit. This large credit can be claimed for one qualifying child annually. If you have more than one child, you may choose which one to claim for this credit. You may also choose to claim one child one year and the other the following year. It’s important to note that any taxable income earned by the child is deducted from the credit dollar for dollar so it’s generally better to designate the younger child as an eligible dependant.
One final thing to be aware of is the possibility that your ex-spouse could claim these deductions as if the child(ren) are living with them. In that scenario, the CRA will send letters to both of you and the one that can prove the custody gets to claim the credits.