Treat families equally
The inequality of tax laws for families in shared time arrangements is concerning
Parents in shared parenting situations need to be treated equally by Canada’s tax laws, the Family Law Section of the Canadian Bar Association writes in a letter to Deputy Prime Minister and Minister of Finance Chrystia Freeland.
The Section is particularly concerned with the application of subsections 118(5) and (5.1) of the Income Tax Act to shared parenting arrangements between separated parents.
In situations where one parent has primary residence with the children, that parent is eligible to claim the dependent tax credit. But what to do when the separated parents are in a shared parenting arrangement?
The Section explains that interpretation of the subsections by the Tax Court of Canada has led to “uncertainty and financial hardship” for those parents, in part due to subsection 118(5) stating that the parent who pays child support cannot claim that tax credit for a child for whom support is being paid.
In shared parenting arrangements, where each parent is required to pay child support to the other, it is “instinctive to have the monthly child support payments offset each other with a net amount paid by one parent to the other,” the letter explains.
The Section urges the government to treat families equally by allowing parents in shared parenting arrangements to share the eligible dependent credit.
Deductibility of legal fees
The CBA Section is also concerned with the unequal application of the ITA for parents to deduct legal fees relating to child and/or spousal support claims.
As the letter reads, a “recipient of support (spousal and/or child) may claim a tax deduction for fees paid to seek or obtain support payments. There is no reciprocal provision for a payor of support who incurs legal fees to obtain a determination of an appropriate support amount, a reduction of support or termination of support.” In the Section’s view, both parties should be eligible to deduct legal fees incurred for support claims.
New language
Significant amendments to the Divorce Act came into force on March 1, 2021. Among other changes, language was updated to remove “custody” and “access” to be replaced with “decision-making,” “parenting time” and “contact.”
Those changes in language were incorporated into the Federal Child Support Guidelines, the Section notes, but not on the CRA website and materials, which continue to use the old terminology. This can create confusion and inconsistency. The letter requests that all government department websites and materials use the same, updated language.
