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Complete Tax Guide for Divorcees

Complete Tax Guide for Divorcees

April 23, 2020

If you have custody of your children and just got divorced, there are some changes on your taxes this year. This complete tax guide for divorcees outlines some of the most common issues.

Your Marital Status

If you were not separated or divorced on December 31st, you still file as married for that year.  Once your divorce is final, you file  as “divorced,” but until then, use “separated.”

Notify CRA by the end of the month after your divorce is final.  For example, if your divorce is final in May, notify them by the end of June.  The options to notify CRA are

  • Use My Account on the CRA website
  • Call the toll-free phone number 1-800-387-1193
  • Complete and mail Form RC65, Marital Status Change

It’s crucial to let CRA know about your marital status change quickly. That way, they can then determine your eligibility for Canada Child Benefit, GST/HST credit and any provincial benefits.  Since your family income drops by the amount of your ex-spouse’s income, you’ll probably receive more government benefits.

See more ‘CRA’s My Account

Legal Fees

Legal fees for collecting child and spousal support are a deduction on your tax return. Collecting late support or attempting to increase support payments have deductible legal fees, too.

Legal fees for preparing the separation and divorce agreements and establishing custody are not tax-deductible.

 

Support Payments

Child support is usually non-taxable, but spousal support (alimony) often is taxable, so claim it as income on your return.

Equivalent to Spouse Credit

You may claim your child as your “eligible dependent” or “equivalent to spouse” credit. This large credit applies to one qualifying child. You can change which child you choose each year. Any taxable income the child earns is deducted dollar for dollar from the credit. So, designate a younger child.

A Final Note

If your ex-spouse tries to claim these deductions, CRA sends letters to both of you. Then, the one that proves custody claims the credits.

Divorce changes more than just your taxes, and this complete tax guide for divorcees is just a start. Easy-to-use CloudTax walks you through your tax preparation step-by-step, so you don’t miss a thing.

Nimalan Balachandran is the Founder & CEO of CloudTax, an income tax filing platform, certified by the Canada Revenue Agency, that allows simple tax filers to file their taxes from home. He was a former employee at the Canada Revenue Agency, and has been in the tax preparation industry for over 10 years. His goal was to bring his passion for technology and assisting Canadians in minimizing their taxes together, by building new software that allows Canadian residents to file simple taxes on their own. Along with his background in accounting, finance, artificial intelligence & business strategy from Seneca College and Massachusetts Institute of Technology, Nimalan has also worked as a Financial Advisor at Sun Life Financials. Nimalan also co-founded a not-for-profit organization, ATI Foundation, serving individuals with intellectual and physical disabilities in the Greater Toronto Area.



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