If 2011 was the year you signed your separation agreement and Spousal Support payments were part of your agreement, you should get professional help when filing your taxes this time around .
The spouse who pays support is entitled to claim the amount of the payments as a deduction against his or her income tax. The receiving spouse is consequently obliged to claim the support he or she has received as taxable income on his or her tax return. If he/she is working, the amount received in spousal support must be added to his/her employment income. The payee will be taxed on his/her total income, including support payments.
To ensure you can make this deduction, your separation agreement, which obliges the payer to make the spousal support payments, must clearly state that the payments are for spousal support. Without this clear statement, the federal Income Tax Act requires the payments to be treated as child support payments, which are not tax deductible. Also, they are they not reportable as taxable income in the hands of the payee (your former spouse and partner).
You need to track these payments on your own. If you are the receiving spousal support payments, don’t assume you’ll be getting any official ”tax slip” like a T4 or T3 that confirms these payments.
I can calculate your estimated tax payable if your receiving spousal support payments or amount of tax deducted if you are paying spousal support. If you are receiving support I can provide some strategies for saving and reducing the tax bill .
You don’t want to have any surprises come next tax season!