How Does Divorce Affect Taxes in Ontario?
Divorce affects your taxes in several ways, starting with your marital status. Under the CRA's rule, you are separated once you have lived apart because of a relationship breakdown for more than 90 days. Report the change by the end of the month after your status changed, through My Account or Form RC65, and benefits are adjusted from the month after the change.
Support paid under a court order or written agreement is reported on line 21999. Only the deductible part, spousal support, goes on line 22000, and child support is not deductible. Legal fees for a separation or divorce cannot be deducted on line 22000, 22100 or 23200.
When capital property is transferred to a spouse living apart after a breakdown, the transferor may avoid reporting the gain or loss when the spouse later sells it, but must file an election with their return. An unmatured RRSP can be transferred to a current or former spouse's plan on Form T2220 under a court order or written separation agreement, with no deduction claimed and nothing reported for the transfer.
Key takeaways
- The CRA treats you as separated once you have lived apart because of a relationship breakdown for more than 90 days.
- Report a change in marital status by the end of the month after it changed, through My Account or Form RC65.
- Spousal support is the deductible part of support, child support is not deductible, and legal fees for a separation or divorce cannot be deducted.
- Capital property transferred to a spouse living apart after a breakdown may avoid reporting the gain or loss, but you must file an election.