Is Spousal Support Taxable in British Columbia? Payer and Recipient Rules

If you pay or receive spousal support, tax questions come up fast. Can the payer deduct it? Does the recipient have to report it as income? And does it matter whether anything is in writing?

The tax treatment of support is set by the federal Income Tax Act and applied through the Canada Revenue Agency (CRA), and it turns on whether the support is paid under a court order or written agreement. This article walks through the basics. Your own situation can have wrinkles, so confirm the details with a lawyer or accountant.

This article covers the law of British Columbia.

The starting point: an order or written agreement

For tax purposes, a support amount is an allowance paid on a periodic basis for the recipient's maintenance, which the recipient has discretion to use. It must be payable under a court order or written agreement, and the spouses must be living separate and apart because of relationship breakdown.

If there is no court order or written agreement, the tax rules do not apply: the payer cannot deduct the payments and the recipient does not report them. That makes putting the arrangement in writing an important step, not a formality.

A written agreement filed in court can also be enforced as an order, which is a separate reason to get it documented properly.

Whether support is owed at all is a separate question from tax. Under the Family Law Act, the amount and duration of spousal support, if any, are determined having regard to each spouse's condition, means, needs and other circumstances. A written support agreement filed in court can be enforced as an order, and enforcement can be through the BC Family Maintenance Agency or by court application.

What the payer does

The payer reports the total support paid under a court order or written agreement on line 21999 and claims only the deductible part on line 22000. The order or agreement must be registered with the CRA, and amounts beyond what the order or agreement requires do not qualify.

For orders or agreements made after April 1997, the commencement day is the day the order or agreement is made.

Because only the amounts the order or agreement requires qualify, it is worth knowing exactly what yours says before you pay anything extra. If circumstances change, a court may change, suspend or end a support order or agreement where a change in the condition, means, needs or other circumstances of either spouse has occurred since the order was made. Until that happens, the order stays in force, and a payer who stops paying first accrues arrears that remain enforceable.

What the recipient does

The recipient reports taxable support received on lines 12799 and 12800. Child support under post-April 1997 orders is not deductible by the payer or taxable to the recipient. Because child support is treated differently from spousal support for tax purposes, it is worth asking a lawyer or accountant to review how your order or agreement deals with each.

Quick comparison

Special situations to watch for

• Catch-up payments. A payer who makes a lump-sum payment of $3,000 or more to bring support payments up to date, and who can deduct it, must give the recipient Form T1198 when it is reportable income to the recipient.
• Retroactive support. A support order may cover periods before the application date, so ask an accountant how a back-payment would be treated.
• Other lump sums. The tax definition refers to a periodic allowance, so whether a particular lump sum is deductible or taxable is worth confirming with an accountant before you pay or sign.
• New relationships. Whether a new relationship or remarriage ends or reduces support depends first on the order or agreement, and the payer must apply to change or end support. How this affects your taxes depends on what the order or agreement then says.
• Legal and accounting fees. Fees for separation, divorce, or setting or contesting support amounts are not deductible on lines 22000, 22100 or 23200.

What to do next

Tax treatment often depends on how an order or agreement is written, so it is best to think about it before signing, not after the first tax season.

• Confirm that your support is set out in a court order or written agreement.
• Check that the order or agreement is registered with the CRA if you are the payer.
• Make sure child support and spousal support are clearly separated in the wording.
• Keep records of every payment, including dates and amounts.
• Ask a lawyer to review the wording and an accountant to review your tax filing.

Frequently asked questions