Shared custody is when each parent has the child or children living with them for at least 40% of the time over the course of the year.
Set off Child Support
A ‘set off’ is one of the ways that parties can pay child support in situations where they share custody. There are two ways that ‘set off’ amounts may be paid.
Angela and Bob share custody of Mary and Susan. Angela earns more money than Bob. With a set off, we first need to calculate what each parent would pay for a table amount of child support. Angela’s table amount to Bob is $600 per month. Bob’s table amount to Angela is $400. When we subtract the two table amounts from each other, there is a difference of $200. This means Angela will pay a child support amount of $200 to Bob. In most set off situations, money is only paid by the higher income earner to the other parent, because the higher income earner pays the difference in the support amounts to the other parent. In this case, only Angela will be able to claim certain income tax benefits because of recent case law.
Sandy and Dale share custody of Joey and Carly. Sandy earns more money than Dale. Again, a set off table amount is calculated: Sandy would pay Dale $1000 per month if both children lived with Dale fulltime, and Dale would pay Sandy $600 per month if both children lived with Sandy fulltime. Rather than Sandy paying Dale the $400 difference each month, Sandy pays Dale $1000, and Dale pays Sandy $600. Because each parent is paying a child support amount, this allows both Sandy and Dale to claim certain income tax benefits.
Getting Professional Advice
There may be income tax implications with a shared custody arrangement.
Court officers cannot provide legal, accounting, or income tax advice and cannot tell you what the income tax implications of your shared custody arrangement might be.
The Canada Revenue Agency’s laws about claims - claiming child related deductions or credits - can be very complicated. These claims can involve a lot of money so it is important that you know how these laws may affect you.
In some cases, only one parent may make a certain claim.
In some cases, neither parent may make a certain claim unless both agree on who will make it.
Recently there has been case law about how income tax should be calculated in shared custody arrangements where set off child support payments are only paid by the higher income earner to the other parent.
You should get professional advice about the tax implications of your shared custody agreement or order.
There is general information about tax issues available on the Canada Revenue Agency website. Getting advice about your situation is best to ensure that you are clear about what will happen in your situation.
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