This is the first instalment of a regular feature on The Tax Issue where you ask the questions and I offer an incredibly coherent and entertaining answer. This week, the topic is marriage breakdown and the equivalent-to-spouse credit.
The Tax Issue:
Upon the breakdown of a marriage, who is eligible to claim an equivalent-to-spouse credit for a child that lives with both parents on a regular basis throughout the year?
This is a question that comes up on a regular basis, and the answer is a bit complicated.
First, let’s look at who can claim the equivalent-to-spouse credit. You must fall into one of the following categories at any time in the year:
- You must be unmarried and not in a common-law relationship; or
- You are married or in a common-law relationship, but did not support or live with your spouse or partner and your spouse or partner did not support you.
Now, let’s look at who would be the subject of the claim. The person must be someone who lives with you and is:
- Resident in Canada (except in the case of your child)
- Wholly dependent on you for support
- Related to you (we’re talking immediate family)
- Except in the case of a parent or grandparent, under 18 years of age, or dependent on you by reason of mental or physical infirmity.
Now that we’ve covered the basics, let’s get down to the actual question. Let’s assume we are talking about a child under 18, the parents separate in the year and the father immediately begins making non-deductible support payments pursuant to a court order or written agreement.
Essentially, the answer depends on whether we are in the year of the breakup or a subsequent year.
In the year of breakup:
In this year, either parent who qualifies can claim the deduction in respect of the child, but they cannot share the credit. So, if the child normally lives with both parents (shared custody), then they must agree as to who will take the credit in respect of the child. If they can’t agree, then neither one gets the claim.
If there are two children, and each spouse wishes to make a claim for one child, this might be possible, but each parent would have to prove that their respective child lived with them and was wholly dependent on them for support at some time in the year.
After the year of breakup:
In any subsequent year, the person required to make child support payments (whether or not the payments are actually made) is not entitled to the claim. So, in our example, the mother would be the only person eligible to make the equivalent-to-spouse claim in respect of the child.
If no support payments are being made, or they are paid but are not required under a written agreement or court order, then the above restriction does not apply, and either parent can make the claim, as long as they meet the criteria set out above.