Taxes After Separation in Ontario: Filing Status and Credits

Separation changes more than where you live. It can change how you describe your household to the Canada Revenue Agency, which benefits and credits you receive, and how money moves between you and your former partner.

This article focuses on the family law points that tend to affect your taxes. Exact filing rules, credit amounts and benefit calculations are set by CRA and change over time, so confirm those details with CRA or an accountant.

Why the separation date matters

Your date of separation is a key date in family law. For married spouses, net family property starts with the property each spouse owned on the separation date, minus debts and excluded property, minus net property owned on the date of marriage (not counting the family home). A court claim for an equalization payment must be started within six years after the day of separation, or two years after the divorce becomes final, whichever comes first. Whether that deadline can ever be extended depends on the facts, so it is worth getting legal advice early.

Because of this, agree on the date with your former partner if you can, write it down, and use the same date in your paperwork. Whether your separation date also affects your tax paperwork depends on your situation, so it is worth confirming with an accountant.

Not everything is shared when you separate. Some property, such as most gifts and inheritances, usually stays with its owner and is left out of equalization. The full value of the family home is shared even if one spouse owned it before the marriage or received it as a gift or inheritance.

Reporting your marital status

How CRA treats your status, and when a change takes effect for tax purposes, depends on your situation. Ask CRA or an accountant how it applies to you, particularly if you and your former partner still share a home or have briefly reconciled.

For divorce purposes, living together again for no more than 90 days in total, with the main purpose of reconciliation, does not interrupt a one-year separation. Whether a brief reconciliation affects your tax status is a separate question to confirm.

Child benefits, credits and parenting time

How child-related benefits and credits are affected by your care arrangements depends on your situation, so it is worth confirming with CRA or an accountant. Under the Divorce Act, parenting time should give the child as much time with each spouse as is consistent with the child's best interests, and it may be set out in a schedule. Unmarried parents, and married parents who are not applying for a divorce, are dealt with under Ontario's Children's Law Reform Act, so how this applies to you depends on your situation.

Before you finalize a schedule, ask an accountant or CRA how shared or primary care is treated for the benefits and credits you expect. Keep copies of your agreement or order in case CRA asks for proof.

Support, agreements and RRSPs

A written agreement on child support, parenting or spousal support must be signed by both parents in front of a witness. To have support terms enforced by the Family Responsibility Office, a domestic contract must be filed with the Ontario Court of Justice or the Superior Court of Justice and then registered with the office. How support payments are treated for tax is something to confirm before you sign.

Dividing registered savings has its own rules. A tax-free direct transfer from one spouse's or common-law partner's unmatured RRSP to the other is allowed if they are living separate and apart at the time and it is made under a court decree, order or judgment, or a written separation agreement, to settle rights arising from the breakdown. Form T2220 is normally used. If funds are paid out to you instead of transferred directly, they are taxable.

To see a pension's value for family law purposes, ask the pension plan administrator.

What to do next

• Write down your separation date and keep supporting evidence.
• Gather recent tax returns, notices of assessment and benefit statements.
• Ask CRA or an accountant how your status, benefits and credits change.
• Ask a lawyer to review any agreement before you sign, especially one that involves support or an RRSP transfer.
• Do not take money out of an RRSP to pay your former partner without advice, since a payout to you is taxable.

Frequently asked questions