Child and Spousal Support
Spousal support (formerly known as "alimony") is support that an ex-spouse is required to pay to a former mate as provided in a divorce or Separation Agreement or other written agreement. There are many different ways to handle payment of this amount. Payments can be made on a monthly basis or in one lump sum. In Canada, it is important to note that only "periodic" spousal support, paid pursuant to a written agreement or court order, is tax deductible by the payer and taxable in the hands of the recipient. Spousal support that is not paid periodically, in accordance with a fixed schedule — and this includes lump-sum support — is not tax deductible and is not taxable in the hands of the recipient.
Spousal support does not necessarily terminate with the marriage of the recipient spouse. The support may be payable for the lifetime of the recipient or it may be payable for a limited period of time, to permit the recipient to upgrade their employment skills and become more self-sufficient. Remarriage does not always end the recipient's dependency on, or need for, support.
Child-support laws differ by province, but child support is determined by the federal Child Support Guidelines, which apply across the country. The basic rule is that the amount of child support is determined by reference to the income of the non-custodial parent and the number of children. So, a parent who earns $X and is supporting Y children will pay a fixed amount each month for the support of the children. It does not matter how much or how little the custodial parent has in assets or earns in income. In addition, there is provision in the Guidelines for what are called "extraordinary expenses," and the most common of these is childcare expenses. The custodial parent who is employed outside the home may need to hire a caregiver for the children. This and other extraordinary expenses (such as music lessons and fees related to a child's participation in sports) are shared between both parents, in the same ratio as their incomes bear to each other. So, in the case of extraordinary expenses, the income of the custodial parent is relevant in the determination of the amount the non-custodial parent will pay to such expenses.
Child-support payments typically continue until your child graduates from high school or is no longer a minor. In Canada, all child-support orders made on or after May 1, 1997, fall under new income-tax rules. Now:
- If you are the parent paying child support, you cannot use your child-support payments as a deduction on your income tax, and
- If you are the parent receiving child support, you do not have to report the child support as income, which means you don't have to pay tax on the child-support payments.
Unfortunately, only just about half of all those who are awarded child support get the full amount to which they are entitled. Penalties for non-payment are getting tougher and laws for enforcing these payments are getting stronger. But the fact remains that, for many single parents, child support is not a source of income upon which they can rely.