Tax treatment of child support

On May 1, 1997, changes were made to the tax treatment of child-support payments. Child support awarded for the first time, pursuant to a judgment rendered or a written agreement entered into after April 30, 1997, is not deductible for the debtor or taxable for the creditor. As a rule, only child support payable after April 30, 1997, is treated in this way for income tax purposes.

Support payable for the benefit of a spouse or former spouse continues to be deductible for the payer and taxable for the recipient, even if the support is awarded after April 30, 1997.

It is important to note that if the judgment or agreement does not distinguish between child support and spousal support, the entire amount of support is considered child support. It is therefore not deductible for the payer or taxable for the recipient.

Child support is not deductible in the following situations:

• If the creditor and debtor do not wish child support to be taxable or deductible, they may make a joint election on form TP-312-V, Election Concerning Child Support. On the form, they indicate a date after April 30, 1997.
• They state that, as of that date, they do not want their child-support payments to be taxable for the recipient or deductible for the payer. This election does not change the amount of child support.
• If child support is awarded under a judgment rendered or a written agreement entered into before May 1, 1997, but a new judgment or written agreement dated after April 30, 1997, reduces or increases the amount of child support, as of the date on which the first payment of the revised amount of child support is made, the support is not taxable for the recipient or deductible for the payer.
• A judgment rendered or a written agreement entered into before May 1, 1997, may also specify a date after April 30, 1997, as of which the child-support payments will not be taxable for the recipient or deductible for the payer.

Once child support becomes non-taxable for the recipient and non-deductible for the payer, it remains so.