Are there tax implications I should know about when signing a separation agreement in Ontario?

Yes. Tax consequences can significantly affect the real value of what each spouse receives in a separation, and they should be addressed before the agreement is signed.

On support: under federal income tax rules, child support payments are neither deductible for the payer nor taxable income for the recipient. Spousal support (also called "alimony") is different: the payer can deduct spousal support from their taxable income, and the recipient must include it as income. This asymmetry means the net cost of spousal support to the payer is lower than the gross amount, which matters when negotiating an amount.

On property transfers: transfers of property between spouses pursuant to a separation agreement generally occur on a tax-deferred "rollover" basis under federal income tax rules, meaning no immediate capital gains tax is triggered. However, the recipient spouse takes on the original cost base — so the tax liability transfers with the asset and is realized when the asset is eventually sold.

Other tax issues include: which parent claims the child tax credit; how to handle any tax years still being filed jointly; and how to deal with business losses or deductions.

Getting advice from a tax professional or a lawyer familiar with the tax aspects of family law before signing is recommended.