Tax filing season will shortly be upon us. How may this impact those who are involved in, or in 2017 have concluded, a family law case?
Legal fees paid for family law matters are generally not tax deductible. However, an exception may be available to recipients of support who, in the previous tax year, have obtained an Order or reached an agreement in which they are the recipients of support.
While tax advice is always recommended, recipients who have incurred legal fees to pursue child or spousal support should request a detailed letter from their family law lawyer setting out the amount of fees incurred to address the issues of child and/or spousal support. The letter should indicate the amount of legal fees specifically incurred for the following:
- to obtain an order or an agreement for support;
- to vary or enforce an existing order or agreement, or
- to defend against a request to reduce support.
That letter should be provided to your tax accountant with all of your other documentation for the filing of your tax return. Note that with respect to spousal support, your agreement or court order must be registered with CRA. This is done through the completion and filing with CRA their Form T1158E with the agreement or order, and not with your Tax Return.