The child benefit is one of the largest tax deductions that the CRA offers. In addition, there are both federal benefits and provincial benefits that parents may receive if they have children under the age of 18.
It’s both natural and wise to be very concerned with whether or not you will get to claim your dependents on your taxes.
While tax law is complex, we can offer some guidelines for divorced parents. Here’s what you need to know about joint custody and taxes.
Terms To Understand
To understand how these payments work it’s very important to understand some basic child custody terms.
Legal custody is the right to make decisions for the child, including but not limited to day-to-day decisions, medical decisions, educational decisions, and legal decisions. Most parents have joint legal custody over their kids, which means they are supposed to consult one another when they make said decisions. Legal custody doesn’t have any bearing on where the children live.
Physical custody is the type of custody indicated when a child lives with a parent. If the child lives with each parent at least 40% of the child they are said to have joint physical custody.
Both joint physical and joint legal custody are the most common custody arrangements in Alberta. Judges prefer custody arrangements that foster healthy relationships with both parents.
If the child is with one parent less than 40% of the time then the arrangement is usually primary physical custody with visitation for the other parent. The parent who has visitation is almost always the parent who pays child support.
Can Both Parents Claim The Child On Taxes in Canada?
No. According to the CRA, if you are required to make child support payments to a current or former spouse or common-law partner for a child, you cannot claim an amount for an eligible dependent on line 30400 for that child.
There are exceptions. There are times when each parent has a court-ordered responsibility to pay child support, and the paying parent is really only paying the difference between the two amounts. When this happens, either parent may claim…so long as the other parent agrees.
If there is any dispute, neither parent may make the claim.
This instance can also arise when there was a change in custody during the year.
Which Parent Claims Child Care Expenses on Their Tax Return?
The parent with the lower income may claim child care expenses if they paid them so that they could go to work or school, or the parent who is living with the child may make the claim regardless of their income vs. the other parent’s income.
If the child lives with both parents throughout the year, both parents can claim child care expenses, but only for the period of time the child was staying with them and they were actively paying for said expenses.
Which Parent Can Make A Claim for Fitness and Arts Amounts?
Either parent may make this claim but the amount must not exceed the maximum amount for that tax year.
This amount has come and gone quite a bit over the years. In the past it has been $1000, so if it were $1000 again one parent could claim $500 and the other $500, or one could claim $200 and the other $800, but the total amount could not exceed $1000 for that year.
Which Parent Has The Right To Claim The Child On Their Taxes?
The parent who gets to claim the Universal Child Care Benefit (UCCB), Canada Child Tax Benefit (CCTB), and the Canada Child Benefit (CCB) is usually the parent who has primary physical custody of the child most of the time.
If you have joint physical custody, meaning the child lives with each parent at least 40% of the time, then you should reach out to an accountant. Usually each parent will receive ½ of the benefit for that tax year. The same is true of the new Canada Child Benefit Young Child Supplement (CCBYCS) which is payable to those receiving the Canada Child Benefit though is paid on a different date.
If you share custody you may not get the same amounts. These benefits are based on your income and family size, and this will be calculated separately for each household.
Who Gets The Alberta Child And Family Benefit?
The Alberta child and family benefit is a non-taxable amount paid to families with children under 18 years of age on a quarterly basis. The combined benefits max out at $5,120 and the maximum base component depends on the number of children and the amount of your own income.
The amount is reduced once the family net income is more than $24,467.
Again, this amount is calculated separately but split in half if the parents share joint physical custody of the child.
Taking Tax Implications into Account
When you work with your Alberta family lawyer to put together a custody arrangement there should at least be some attention paid to the tax implications of said arrangement, especially in light of the asset divisions or spousal maintenance arrangements that will also make it into the same divorce settlement.
For example, for tax benefits where the parents must agree on who claims the benefit such as claiming the child as your dependent, it is better to have that information clearly spelled out in a divorce settlement or decree than to have it come up as a point of contention at tax time after the divorce is already finalized. That way both parents know what to expect and what they may do.
Want an attentive, responsive lawyer who will fight hard for your needs? We are experienced with child custody and child support matters and will help you create a workable settlement that takes the needs of your family into account.