Tax Matters: In a Separation, Who Gets to Claim the Child Tax Benefit?

Tax Matters: In the Event of a Separation, Who Gets to Claim the Child Tax Benefit?

If your relationship has unfortunately come to an end and a separation or divorce is being contemplated, you likely have a host of questions regarding your personal finances and how they may change once the separation is finalized. In this blog post we’ll explore the “Canada Child Tax Benefit” and discuss who gets to claim this benefit in the event of a separation or divorce. For further information on this or any family law matter please contact the Watson Goepel Family Law Group at 604.688.1301 and one of our family law lawyers will be happy to assist.

What is the Canada Child Tax Benefit?

First established in 1989, with the goal of eliminating child poverty nationwide by the year 2000, the Canada Child Tax Benefit (or “CCTB”), is a non-taxable benefit paid each month to assist families with affording the costs of raising children under the age of 18. As the Canada Revenue Agency (“CRA”) notes in their own materials the CCTB is intended for those who are “primarily responsible for the care and upbringing” of children. As such, once a separation or divorce occurs and the care and parenting time for children may change, the CCTBs may be affected too.

Who Normally Receives the CCTB?

To qualify for the CCTB, the parent must be living with the child or children, the children must be under the age of 18, and the parent must be a resident of Canada. Families qualify for the CCTB as soon as the child is born or begins to live in the household, and the CRA encourages individuals to apply even if they are in shared custody situation. As these benefits are calculated based on income it is possible that parents will not qualify if their after-tax income is deemed to be adequate or above certain thresholds established by CRA.

How Shared Parenting Affects the CCTB

In order to determine the percentage split of the CCTB between two co-parents, the Canada Revenue Agency concerns itself with the amount of time that each parent has the children. In a traditional ‘shared parenting’ arrangement, one in which each parent is caring for the children more than 40% of the time, the CCTB is normally split equally between both parents, provided they are both eligible to receive the CCTB. Previously, the CRA assigned each parent to a six-months-on/six-months-off rotation schedule but this policy ended in July 2011. In short: if you are sharing custody of a child more or less equally and you qualify based on the income thresholds established by CRA you are entitled to share in the CCTB with your co-parent.

Other Transfer Payments That May Be Affected

The CCTB isn’t the only transfer payment or tax item that can be affected by your separation. GST credits, ‘spousal’ credits and transfers, eligible dependent tax credits and medical expenses credit are all tied to how your taxes are filed and your marital or parenting status so attention will need to be paid to these areas as well.

A separation can be a trying, confusing time; especially if children are involved. Our lawyers are experienced in every standard area of family law, from parenting matters, to division of assets, to support arrangements. Contact Watson Goepel LLP today at 604.688.1301, or find us on the web at www.watsongoeopel.com, so we can try and assist you with every step, right down to the final signing of your separation agreement or obtaining your divorce order.