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

    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

  • #2
    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.

    Comment


    • #3
      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.

      Comment


      • #4
        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&#37.

        Thanks for the information.

        Comment


        • #5
          Yes, if you are being paid monthly.

          Comment


          • #6
            I know this thread is old, but I wanted to know that after you filled out all the required forms and source deductions have been approved then who does my employer give the money to? Does my employer transfer money to my spouse's bank account?

            Comment


            • #7
              if i am correct, they only reduce the amount of income tax that they collect from you to pay the government. They are not deducting the amount of SS you are suppose to pay, you are responsible for that.

              Comment


              • #8
                sam666, I think you have confused two different questions.

                If you are dealing with the FRO, your employer pays the FRO (if it is set up that way.) There should be no contact between the employer and your ex.

                The question here was about tax deductions. If the SS is a regular monthly payment, CRA recognizes it as a deduction. An earlier question was about adjusting the amount of tax that is withheld from the paycheck to reflect the lower amount of tax owed.

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                • #9
                  SS will not be registered with FRO. So if whatever 'standing on the sidelines' said is correct then that's fine. Can someone confirm this? I just need to know if my employer will transfer money to her or would I be responsible for paying her.

                  Also if I understand the procedure, I fill T1213 and send to CRA with separation agreement. If they approve it then I go to my employer with separation agreement?

                  Comment


                  • #10
                    Unless your wages are garnished, it is YOUR responsibility to pay the ex the SS

                    Comment


                    • #11
                      Your employer deducts tax from every paycheck and sends it to CRA.

                      YOU can fill out a form and give it to your employer (not CRA) so that they deduct less tax from every paycheck.

                      YOU pay SS to your ex each month (cash, cheque, money transfer: however you agree to).

                      On your 2013 tax return, you enter the amount of SS paid in 2012 as a deduction (if you paid $6000 SS, then your taxable income is reduced by $6000).

                      Comment


                      • #12
                        Thanks guys! It's even better that I transfer money to her myself.

                        Comment


                        • #13
                          on that note, whats the 'best' way of paying SS? Cheque? e-Transfer? or some other way?

                          Comment


                          • #14
                            Originally posted by sam666 View Post
                            on that note, whats the 'best' way of paying SS? Cheque? e-Transfer? or some other way?
                            whatever way you have a paper trail is the best.

                            Comment


                            • #15
                              my lawyer says to give her 12 post dated cheques at the start of every year...is this ok?

                              Comment

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