The process of separation and divorce forces one to make what seems like an endless stream of decisions, many of which are fueled by emotions. At such a time, the need to make prudent tax and financial decisions often takes second place, leading many down a path where the financial impact of a separation and divorce can be devastating.
With careful thought and proper planning & analysis, however the financial impact in both the short and long term can be effectively managed. There are many financial and tax issues that need to be addressed and, with the tax deadline looming, these tips will focus on and assist you with the tax issues surrounding separation and divorce.
1. SUPPORT PAYMENT
2. DIVISION OF PROPERTY
i. Division of property on marriage breakdown
ii. RRSP and pension assets
3. DEDUCTIBILITY OF LEGAL FEES
4. AFTER THE SEPARATION – WHO CLAIMS WHAT?
i. Tax deductions for children – the “equivalent to spouse” deduction
ii. Year of separation
iii. Years after the year of separation
Obtaining professional advice is usually a good idea when dealing with tax matters. When those tax matters involve the end of a marriage, such advice is essential. The tax rules in this area, particularly those governing the taxation of support payments are, unfortunately, among the more complex in the Income Tax Act.
William Brian Cooke, CPA, CMA helps individuals as well as couples develop solutions that address a variety of personal financial issues. Bill can be reached at (416) 806-4961 or firstname.lastname@example.org.