October 29, 2019

Tax implications of divorce

In a divorce, on top everything else, there’s the way it affects your taxes. Inevitably, assets accumulated during a marriage will be divided, and the guidelines on how they will be divided will often differ across provinces. Beyond the division, there’s also how the taxes attached to certain assets and support matters for children will affect each person’s taxes. An amicable divorce can allow the parties, separating but still willing to work together to some extent, to plan how the final disposition of their assets will be executed to control any taxes that might apply.

Key Takeaways:

  • Individuals must notify the CRA of their status change (using Form RC65 Marital Status Change) once separated more than 90 consecutive days.
  • Separation agreements/court orders must be registered with the CRA in cases where spousal support must be paid, because spousal support payments are treated differently than child-support payments for tax purposes.
  • In shared parenting, if certain conditions are met, typically both parents will share benefits and credits like Canada Child Benefit (CCB), GST/HST credit and eligible dependant credit.

“Assets acquired and debts incurred during a marriage are included in determining family property and distributed equally when the marriage ends.”

Read more: https://www.advisor.ca/tax/estate-planning/tax-implications-of-divorce-part-1/

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