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Occasionally couples negotiate amounts of child and spousal support based on balancing them to take into account that while child support is not tax deductible, (unless being paid pursuant to an agreement entered into before May 1, 1997) periodic spousal support paid pursuant to a written agreement is tax deductible to the payer, and taxable in the hands of the recipient. This works well for couples who have significant discrepancies in income so that even taking into account the tax paid by the recipient, there is a net savings to the payer (the spousal support is usually increased to take account of the recipient's tax paid). However, where the child support is reduced far below the Table amount in order to increase the spousal support payments, Revenue Canada may not permit the agreement to pass if the payer submits it so that s/he can obtain on each pay cheque the benefit of the reduced taxes. So the amount of child support can not be so far removed from the Table amounts that a red flag is raised for the taxing authorities
SO ... just how much can be adjusted so that red flags are not raised? Again, assuming that both parties agree to such an arrangement to keep things fair.
Hubby
Occasionally couples negotiate amounts of child and spousal support based on balancing them to take into account that while child support is not tax deductible, (unless being paid pursuant to an agreement entered into before May 1, 1997) periodic spousal support paid pursuant to a written agreement is tax deductible to the payer, and taxable in the hands of the recipient. This works well for couples who have significant discrepancies in income so that even taking into account the tax paid by the recipient, there is a net savings to the payer (the spousal support is usually increased to take account of the recipient's tax paid). However, where the child support is reduced far below the Table amount in order to increase the spousal support payments, Revenue Canada may not permit the agreement to pass if the payer submits it so that s/he can obtain on each pay cheque the benefit of the reduced taxes. So the amount of child support can not be so far removed from the Table amounts that a red flag is raised for the taxing authorities
SO ... just how much can be adjusted so that red flags are not raised? Again, assuming that both parties agree to such an arrangement to keep things fair.
Hubby