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Avoiding tax headaches in Ontario separation and divorce

Spring may be in the air when April arrives, but it also signals tax reporting time. For Ontario couples who have undergone separation and divorce and are also spousal support payors or recipients, calculating returns can be a headache. Who gets to claim what, and how, is a question that family law lawyers hear repeatedly as filing deadlines loom.

Thankfully, some simple guidelines can be applied because tax laws recognize the reality that two households are more expensive to maintain than one. If, at the time of separation, written agreements or court-ordered papers have been appropriately filed, both payors and recipients of spousal support can make claims for the year due for report. What complicates matters is the difference in each ex-spouse's marginal tax rate.

As anyone who is even remotely familiar with the Income Tax Act knows, tax rates are inflexible factors that can send anyone running for the aspirin bottle. For example, it may seem counterintuitive but payors with higher tax rates may end up paying less tax if they claim spousal support. However, a payor cannot claim any legal fees incurred if changes are applied for through the courts, while a recipient can.

Experienced family law firms are conscientious about ensuring that their clients receive all appropriate fiscal information at tax time. Each scenario is unique and will change over time -- something family law lawyers address accordingly. Tax regulations are complex and very specific regarding separation and divorce. An Ontario family law firm is frequently able to help reduce aggravation at tax time for a client, whether payor or recipient.

Source: Financial Post, "What child and spousal support payors (and recipients) need to know at tax time", Laurie H. Pawlitza, April 18, 2018

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