What is an equalization payment in Ontario family law?
An equalization payment is a lump-sum or structured payment made by one spouse to the other at the end of a marriage to balance the economic gains each made during the relationship. Under the Family Law Act, after each spouse calculates their net family property, the spouse with the higher amount owes the other half the difference.
For example, if your net family property is $400,000 and your spouse's is $100,000, the difference is $300,000 and you would owe your spouse $150,000 as an equalization payment.
The payment reflects sharing economic gains — not punishing success or rewarding staying home. It can be made in cash, by transferring property, or through other arrangements the spouses agree on. Equalization payments between spouses are generally not taxable income to the recipient and are not deductible by the payer, which distinguishes them from spousal support.
Key takeaways
- The equalization payment is half the difference between each spouse's net family property
- The spouse with the higher net family property pays the other
- Payments can be cash, property transfer, or other agreed arrangements
- Equalization payments are generally not taxable income under federal tax rules