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Tax Implications on Shared Custody

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  • Tax Implications on Shared Custody

    I have some questions on some Tax issues such as CCTB and the universal childcare benefit etc that are federally regulated for shared custody situations:

    1. Can we or will the court approve a 50/50 split for CCTB and Universal Child Care Benefit if we write it in a divorce / custody agreement for a 50/50 shared custody? I think I have definitely seen examples in CanLii. CRA has a month on - month off distribution of CCTB and UCCB if kids live in two homes.

    2. In 50/50 shared custody, can a couple also write in the judgment that they should claim the child as dependent in alternatively years (such as odd years by Mom, even-numbered Tax years by Dad)? Often times because of income difference one party has to pay the other CS, but CRA wouldn't allow the Dad to claim the child as dependent if Mom doesn't agree. We know technically actually both parents pay each other CS in shared custody, one party pays the other only because their salaries are not equal.

    3. If Mom in certain years claim the child as dependent, but Dad still has a 3~4K childcare expense for childcare, how will this be handled when filing a tax return? I think this might have been discussed before, but I couldn't find that post. I think if one parent pays for Childcare, s/he should be allowed to claim that expense regardless of who claims the child as dependent.

    Anyone has any experience?

  • #2
    1. Can we or will the court approve a 50/50 split for CCTB and Universal Child Care Benefit if we write it in a divorce / custody agreement for a 50/50 shared custody? I think I have definitely seen examples in CanLii. CRA has a month on - month off distribution of CCTB and UCCB if kids live in two homes.
    Sure ya can...but that doesn't mean it's going to be ENFORCEABLE. CCTB/UCCB is governed by the INCOME TAX ACT and exists outside the jurisdiction of family court. Anyone putting who gets what for the CCTB/UCCB in a separation or divorce agreement is both 1. retarded and 2. just asking for trouble. No lawyer should allow a clause like that into an agreement, if they do then they are either hoping you don't figure it out on your own, or are incompetant.

    2. In 50/50 shared custody, can a couple also write in the judgment that they should claim the child as dependent in alternatively years (such as odd years by Mom, even-numbered Tax years by Dad)? Often times because of income difference one party has to pay the other CS, but CRA wouldn't allow the Dad to claim the child as dependent if Mom doesn't agree. We know technically actually both parents pay each other CS in shared custody, one party pays the other only because their salaries are not equal.
    Yes, you should write this in and then follow it. It's also not enforceable at the CRA level, but you CAN take the agreement and file a motion for costs from the other party if they file anyway on your year.

    3. If Mom in certain years claim the child as dependent, but Dad still has a 3~4K childcare expense for childcare, how will this be handled when filing a tax return? I think this might have been discussed before, but I couldn't find that post. I think if one parent pays for Childcare, s/he should be allowed to claim that expense regardless of who claims the child as dependent.
    If you get audited you can't BOTH claim it. Depends on how amicable things are. If you can work with the ex, you let them claim the full amount of the child care, and then you figure out how much extra they got back from your contribution and split it. However, that only works if you are amicable, and doing the same for them on your year to claim in.

    Otherwise, you only get it once/2nd year OR you can try filing it and risk getting audited.

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