Some believe that support payments are tax-deductible for the payer and that, conversely, the recipient must declare them as income.
This statement is partially true, as support payments payable to an ex-spouse are tax-deductible. However, support payments made for the benefit of minor or adult children have been completely tax-exempt since 1997. [1]
Child support
Since May 1, 1997, the parent receiving child support payments no longer has to include this amount as income in their annual tax returns. Currently, the amount received as child support is therefore no longer subject to the taxpayer’s income tax rate based on their total income.
Before May 1, 1997, the paying parent could deduct the amount in their tax returns, thereby benefiting from a reduction in the tax payable. This method of accounting for income led to several difficulties for the courts, which then had to take into account the tax payable by the parent receiving these payments for the benefit of their children.
This is a form of “tax exemption” for child support, aimed at maximizing the funds available for the child’s needs.
Since then, child support payments are no longer taxable for the parent who receives them, nor deductible for the parent who pays them. The amount paid will be considered a net amount.
Effective Date
This tax exemption applies only to agreements concluded or orders issued after May 1, 1997. However, any subsequent modification of an initial order rendered before this date will result in the tax exemption of the support payments.
It is therefore possible to modify the initial order to benefit from the new tax-exempt payment regime, if a party believes that the effects of the tax exemption will be beneficial compared to what was previously provided.
Spousal Support
This tax measure does not apply to support payments payable to an ex-spouse, which continue to be taxable for the recipient and deductible from income for the payer.
Insofar as this tax exemption applies only to support payments payable for children, agreements and orders must now distinguish between the amount payable for the ex-spouse and the amount payable for the children, when support is payable for both categories of beneficiaries. In the absence of such a distinction, tax authorities will treat the support as child support, thereby depriving the payer of spousal support of a deduction to which they would normally be entitled.
[1] The granting of spousal support is assessed according to specific criteria, and the advice of a lawyer is invaluable for any information on this subject. Child support is a matter of public policy and is payable as soon as a minor child is involved. It is possible to replace child support payments with other measures, but such cases are rare, and it is advisable to consult a lawyer on this point.
