After tax costs

[rockscan]

It may sound petty to do the net cost calculation but when you consider the benefits to the other party its not. Especially when your proportionate share is higher than half. Your ex gets to claim the eligible dependent and the tax breaks. Its only fair to consider the net costs for this stuff since it basically amounts to getting paid for the expense twice.

[Beachnana]

But remember its not on the full costs of the daycare unless your annual daycare is under $7000.

If your daycare is over $7000, which for many that is the reality, then you cannot calculate the marginal rate on the total amount of daycare. Just on the Maximum allowed to claim.
Therefore,

If your daycare is expected to be $8600 p.a. Your maximum deduction is $7000 and with a marginal rate is 30%. the max you will receive is $2100 refund, which equates to $175/ month. So on a 50/50 split you should reduce daycare monthly by $87.50 per month.

You do not take $8600 and calculated the marginal tax rate and decide the tax refund will be $2580 and therefore $215 per onth so based on 50/50 split reduce your amount by $107.50 per month.

Also I have the concern that one parent has to wait until tax time earliest April of the following year to get the refund, while the other parent will reap the benefit of deducting the tax each month. For some that extra $80 odd will makemthe difference, others maybe not. But that is just my biased opinion.

[rockscan]

Which is why his ex should be reasonable and refund him his portion of the credit when she receives it at tax time. From the sounds of it she doesnt even think she should.

I always plug the numbers into my tax software to test it out. Some of the ministries of finance websites are helpful too. Ontario has a good page on activities credits. We havent seen many s7 activities now though since my partner is up front about receipts and claiming the tax benefit. Funny how it went from "the cost is about $XXXX making your share $XXX" to zero expenses now that he demands receipts. (Yes he was crazy nice and got manipulated a lot.)

[Beachnana]

Which is why his ex should be reasonable and refund him his portion of the credit when she receives it at tax time. From the sounds of it she doesnt even think she should.

I always plug the numbers into my tax software to test it out. Some of the ministries of finance websites are helpful too. Ontario has a good page on activities credits. We havent seen many s7 activities now though since my partner is up front about receipts and claiming the tax benefit. Funny how it went from "the cost is about $XXXX making your share $XXX" to zero expenses now that he demands receipts. (Yes he was crazy nice and got manipulated a lot.)

Exactly but it should be easier. Again CRA should be able to work this out. You should be able to register that you both pay towards daycare and therefore be able to claim your proportionate refund. CRA causes so many problems in this area. But yes, if someone pays, each month, then they should be entitled to a share of the refund. Or at the very least the amount of refund due should be applied to the next daycare invoice. So reducing those first few months of payments down.

[blinkandimgone]

But remember its not on the full costs of the daycare unless your annual daycare is under $7000.

If your daycare is over $7000, which for many that is the reality, then you cannot calculate the marginal rate on the total amount of daycare. Just on the Maximum allowed to claim.
Therefore,

If your daycare is expected to be $8600 p.a. Your maximum deduction is $7000 and with a marginal rate is 30%. the max you will receive is $2100 refund, which equates to $175/ month. So on a 50/50 split you should reduce daycare monthly by $87.50 per month.

You do not take $8600 and calculated the marginal tax rate and decide the tax refund will be $2580 and therefore $215 per onth so based on 50/50 split reduce your amount by $107.50 per month.

Also I have the concern that one parent has to wait until tax time earliest April of the following year to get the refund, while the other parent will reap the benefit of deducting the tax each month. For some that extra $80 odd will makemthe difference, others maybe not. But that is just my biased opinion.

To be fair though, the parent receiving the tax refund may not be getting the break monthly, but they do know when they get their refund that they will have daycare expenses over the coming year and could consider putting the refund money away and supplementing the monthly cost with that money. Yes, only a viable option after year one, but it seems one should make the effort knowing the expense is coming.

[Beachnana]

Either way. I guess but sure nice to have the refund come through in April.

[mcj2012]

Just to answer a few questions that came up. My ex takes home anywhere between 130k - 160K. However, because she incorporated herself as a consultant, she pays herself only 80K and claims that what I should be using for her income. Hence why I am taking her to court, I would like the courts to use her full income. Our case conference is in May and we have to clear up the self-employed income issue and all the daycare she has claimed for the past 5 years (full amount). Why am I doing this only now? because I was naive and thought that I was to use her T4 amount and that I could not claim any daycare expense or recieve the savings. It was only last year that I came across my rights in terms of child support. 1 year later, she is still not willing to disclose all of her financials. However, I did see her personal income tax returns for the last three years and I saw full daycare claims, all tax credits, fitness credits, arts credits, medical expenses that I had paid half for. I wonder if the judge will go back and give part of those credits I deserved. I suppose I may be dinged for being "naive" about my rights.

Thank you all for your advice. Gotta love this board!

[rockscan]

Technically she should be reimbursing you for your share of those credits. Make sure thats part of your request. If anything, it may reduce any money you have owing or owe in the future.

[dinkyface]

So at $80K she's getting 33% of her daycare costs back in tax refund, and you are paying 50%, meaning she's only out of pocket for 17%!

And at $100k she's getting 43.4% of her daycare costs back in tax refund, and you are paying 50%, meaning she's only out of pocket for 6.6%!

[maxwellsmart]

After tax costs

Where the individual enjoying the tax deduction or tax credit is self employed and subject to remitting quarterly tax instalments they get the tax break quarterly

[mcj2012]

Does it have to state in your separation agreement that you pay the after tax cost of child care. Currently, our agreement says I pay 50% of the cost of daycare. Her argument is that I am not adhering to our agreement by paying the after tax cost. Is this something that I need to have in my agreement for it to be legal? If I send her the 50% of the invoice cost, I highly doubt I will receive the difference from her once she receives her refund from the government. Has this happened to anyone? is anyone paying the after tax cost of daycare and was it agreed to first, or is this just by law that it has to be done this way? thanks

[maxwellsmart]

My agreement includes the following from
the law. Others can comment as to whether a judge would require that to be in an agreement in order to allow apportionment based on after tax cost. Sorry I don't know
the answer .





7(3) of the law says - Subject to subsection (4), in determining the amount
of an expense referred to in subsection (1), the court must take into
account any subsidies, benefits or income tax deductions or credits relating
to the expense, and any eligibility to claim a subsidy, benefit or income
tax deduction or credit relating to the expense.

[blinkandimgone]

It's 50% of the ACTUAL out of pocket costs, ergo after tax cost. If she has an issue with it she can take it to court where the judge will explain it to her.

[mcj2012]

She totally has an issue with this. In fact, I received a note from her lawyer stating that I am not adhering to the current separation agreement. So I am wondering if it has to say in the agreement that it's the after tax cost (as right now it says I pay 50% of the cost of childcare), or is her lawyer just clueless as well or just following instructions from client. I agree with you (blinkandimgone), I just can't see how it's fair that after all these years she has gained so much money from something that I was paying for and yet today still does not want to be fair about it. She clearly made money off me. I just wish I knew if I am still within my rights to have only given her the after tax cost this time around. I have not done that in years as I was not aware until of any of my rights until the past year. I am afraid when we confront the judge in may that he will say your ignoring has cost you money!

[stripes]

Cost is different from price. If I buy a car for $20 000 and then receive a rebate for $5 000, the cost to me is $15 000, even thought the cheque I gave the car dealership was for $20 000. Child care works the same way - the price is what you pay up front, but the cost is the amount of money that you are out of pocket, once you take into consideration all the tax benefits, subsidies, etc. You ex's lawyer is trying to get you to pay the price of child care, while your agreement (and the law) states cost. Tell the lawyer that you are willing to pay half the cost of child care, but that does not mean you are responsible for half the price.