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Set Off Child Support and Tax Deductions

March 15, 2019

In “shared custody” situations or where a child resides with each parent at least forty percent of the time, there could be a set off of child support. This means that the Table amount of child support is calculated for each parent based on his or her income for support purposes, and the resulting child support is the difference between these two figures.

Historically, Separation Agreements and court orders were drafted so that in these situations it is just the net amount that is paid from the parent with the higher child support obligation to the other parent.

However, following tax law decisions such as Harder v. Queen, 2016 TCC 197 (hereinafter “Harder”), it has become readily apparent that in order for both parents to avail themselves of the dependent deduction, actual periodic payments are required to be made from each parent to the other. Not only does the wording in an agreement or order have to provide for same, but the payments must actually be made from each parent to the other.

Following are excerpts of Justice Bocock’s decision in Harder:

“All of these decisions or situations involve a mandatory requirement for each parent to pay an amount reflected in a court order or formal agreement marching along with conclusive evidence of actual payment being made. It does not include the expeditious use of a computer software programme, the culmination of which is a unilateral payment of a support amount by only one parent to the other.” (see para. 10)

Further, “the engagement of the combined effect of subsections 118(5) and 118(5.1), at a minimum, requires a comprehensive documentary and evidentiary record.” (see para. 11).

“Surely cheques, or even their more modern replacement of recurring e-transfers, may evidence a clearly enumerated, reciprocal and mandatory support amount paid by each spouse to the other.”(see para. 11)

For further information, specifically with respect to the amount for an eligible dependent, click here.

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