Canadian Tax Tips for Divorce

Divorce can be extremely stressful for a couple.  The following tax saving tips will ease your financial burdens and life transition.
  • Update your CRA with your marital status.

A single parent income will likely increase your Canada child benefit amount.

  • Choose the asset with the highest after-tax value.

While assets such as RRSP’s are fully taxable, you can benefit from keeping the family home which has a 0% tax rate through claiming the principle residence exception.

  • Separate ownership property.

In the case that you and your partner own two properties, allocating one property to each of you means you can both take advantage of principle residence exception. 

  •  Avoid cashing in RRSP.

Instead, take advantage of a rule in the income tax act which allows for a transfer of RRSP with no tax consequences to your partner in case of a marriage breakdown.

  • Claim the eligible dependent tax credit.

If you have children through a joint custody, one spouse is to claim this credit.

  •  Claim tax deductions on certain legal fees.

Certain legal fees such as collection of support payments are deductible on your personal tax return.

  • Claim tax deductions on certain support amount

Although the general rule for a support amount to be deducted is that it must be paid directly to the recipient, some payments for certain expenditure can also be deducted if certain criteria are met. For example, you might be able to deduct property tax or insurance payments on the family home from your income.