It’s All in the Family

August 12, 2011

Families come in all difference shapes and sizes these days. It seems now more than ever there is no cookie cutter model with the beautiful home on an acreage, white picket fence and 2.4 adorable children running around in coveralls or a Sunday dress. Over the years Mommy & Daddy may have divorced and re-married. As new families form, ties to the past continue. And out of the old, come new obligations. Child support often needs to be dealt with in today’s family. Is it deductible? What can be claimed?

Child Support
Child support used to be a deductable expense for the parent paying the bill and taxable to the parent receiving it. In order to deduct a child support payment, there had to be a registered written agreement or court order. In May of 1997 the rules changed. Under the new rules, child support payments are neither a deductable expense for the payor or taxable for the recipient. Agreements that were made before that date and are still upheld and subject to the past rules. However, if both the payor and the recipient agree and sign the required form, they can make and receive payments under the new rules without having to re-write their existing agreement.

Child Care Expenses
There is also the issue of Child Care Expenses. This deduction is allowable for the parent with whom the child is living. The CRA says: ‘you can claim child care expenses you incurred while the eligible child was living with you.’ If there are two parents, it must be claimed by the lower income spouse.

An eligible expense includes the cost associated with:
-Daycare or nursery schools
-Day camps/schools/sports camps/boarding schools that exist mainly to care for the children, and not just as a recreational activity.

Expenses that can’t be deducted under this provision include:
- Hospital or medical expenses
-Clothing costs
-Transportation cost

There is also the Child Fitness Tax Credit program that allows a claim of up to $500 per child (in 2010) for those who participated in a qualifying activity program. It’s pretty easy to find a qualifying program. It has to be 8 consecutive weeks, or 5 consecutive days of building muscular strength, endurance, balance or flexibility. The child has to be under the age of 16 (or 18 if disabled) and the claiming parent has to meet the requirement necessary to claim the Child Care Expense.

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