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Financial Issues This forum is for discussing any of the financial issues involved in your divorce.

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  #1  
Old 05-28-2020, 09:57 PM
Helpmyspouse Helpmyspouse is offline
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Question Taxes on settlements

Does anyone know if you have to pay taxes on settlements from family law matters? If you are able to settle equalization payment, spousal support, or child support, etc without going to trial are these monies taxable?
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Old 05-28-2020, 10:47 PM
Kinso Kinso is offline
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No on everything except periodic spousal support (but not lump sum).

Also, legal fees to secure support are tax deductible (but not legal fees oppose support)
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Old 05-29-2020, 10:38 AM
Stillbreathing Stillbreathing is offline
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My accountant said only legal fees to secure child support are tax deductible not legal fees to secure spousal support.
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Old 05-29-2020, 10:44 AM
Kinso Kinso is offline
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https://devrylaw.ca/tax-treatment-of...y-law-matters/

"Tax Treatment of Family Law Legal Fees

In certain circumstances, legal fees incurred in the context of family law litigation are tax-deductible. Under Lines 221and 232 of your tax return, the following legal fee expenses can be deducted by a support recipient from their income:

Legal fees incurred to establish entitlement to spousal or child support;
Legal fees incurred to increase the amount of spousal or child support payable;
Legal fees incurred to claim retroactive spousal or child support or to enforce arrears of support;

Legal fees incurred to try and make child support non-taxable."
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Old 05-29-2020, 10:48 AM
Kinso Kinso is offline
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https://www.canada.ca/en/revenue-age...ents.html#toc9

See 3.81... it just says support, which is encompassing.

I think your accountant is incorrect Stillbreathing... but I am not a tax expert.
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Old 05-29-2020, 10:53 AM
Stillbreathing Stillbreathing is offline
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Thank you Kinso. My accountant requested my family lawyer amend their letter to only include the legal fees for child support. They have accepted letters in the past indicating both. I will pass the link to them. Thanks again.
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Old 05-30-2020, 11:41 AM
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Absolutely legal fees to enforce and to defend spousal support are tax deductible. Even though I was successful and awarded costs for a minuscule portion, I had MANY years' worth of legal and 100% was tax deductible. Even if you are unsuccessful i believe they are 100% deductible. I recall CRA requested a letter from lawyer pretty much every year which was no big deal.
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Old 06-03-2020, 11:34 AM
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Quote:
Originally Posted by Kinso View Post
Also, legal fees to secure support are tax deductible (but not legal fees oppose support)
In the case of offset child support claim do both parties get denied the tax claim as they both are support payers?
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Old 06-05-2020, 01:00 PM
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Quote:
Originally Posted by Tayken View Post
In the case of offset child support claim do both parties get denied the tax claim as they both are support payers?
I thought that recently the CRA has started ruling that the parent making the offset payment is a support payer, and the other parent is a support recipient.

I would not be surprised though if they would decide that neither party gets the tax claim.
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Old 06-21-2020, 05:24 PM
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I think I remember reading that if you write the agreement that parent a pays x to parent band parent b pays y to parent a, they are both now recipients..I did ask lawyer recently and she said she writes it this way for that reason
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