spousal support is tax deductible (?) how does this work?

[jupiter_saturn]

Hi there,

maybe you can help me understand:

-spousal support is tax deductible, is that right?

-how does this work? I pay spousal support for 2010 for example, then in my tax return I file in 2011, I claim these as deductions?

-or can I reduce the amount of income tax deducted from each paycheque?

-what is the rate for the deduction? Does each dollar of support, reduce my taxable income by one dollar as well?

Thank you

[Foredeck]

For it to be taxable/deductible, it has to be a periodical payment, and not a lump sum payment. And, it has to be in writing, either by a court judgment or a signed separation agreement.

It'll be before line 150, not sure exactly which line it is. So, it'll increase her taxable income and it'll be a deduction for you.

The rate would depend on your salary. If you have a salary under about 40,000$, the rate would be 25%. Income from 40 to 60k is roughly 35%.

And, you could deduct the taxes from your paycheck. If you check with your HR department, they should have a TD1 form that you sign every year, and you can add all of your income tax deduction, and they'll make the proper calculations.

Also, she will have to claim it as income. If she doesn't, CRA may refuse it and you will have to appeal. It shouldn't be too much trouble, just time consuming.

[dadtotheend]

The deduction for you happens at line 220, after line 150. For your ex the inclusion happens at line 128, before line 150.

The tax rate is roughly 30% between income levels of $40K and $81K.

Here is the form you need to fill out to have your source deductions reduced to account for the deductible spousal support:

http://www.cra-arc.gc.ca/E/pbg/tf/t1213/t1213-04e.pdf. Be prepared to be required to send the CRA a copy of your court order/separation agreement.

[jupiter_saturn]

O.K. then, so let's say I were earning $60K and paying $1K per month in spousal support. This means that I could arrange, for the income tax withheld each paycheque, to be reduced by $1000 x 0.3 = $300 (if we presume the incremental tax rate is 30%).

Thanks for the information.

[dadtotheend]

Yes, if you are being paid monthly.