Principal Issues: Whether a former spouse can claim the equivalent-to-spouse tax credit and the child tax credit for a child that is living with that parent and that parent pays a child support amount in respect of that child?
Position: No, if that parent is the only parent that is required to pay a child support amount for that child.
Reasons: Where spouses have been living separate and apart throughout the year paragraph 118(5)(a) of the Act would apply to prevent the parent that is required to pay a child support amount to his spouse or former spouse, in respect of a child, from claiming the credits under paragraphs 118(1)(b) and 118(1)(b.1) of the Act for that child.
July 7, 2014
XXXXXXXXXX
Dear XXXXXXXXXX:
The office of your member of Parliament, XXXXXXXXXX, sent me a copy of your correspondence, which I received on May 16, 2014, about the Canada Revenue Agency (CRA) not allowing you to claim the equivalent-to-spouse tax credit and the child tax credit for your XXXXXXXXXX son.
Paragraph 118(5)(a) of the Income Tax Act does not allow a parent to claim the credits available under paragraphs 118(1)(b) and 118(1)(b.1) of the Act if the parent is required to pay a support amount to his or her spouse or former spouse for that child.
You explain in your letter that you have an agreement with your former spouse to pay her a child support amount for your XXXXXXXXXX children and to share custody. You state that they live with you one week and with her the next. However, after you made this agreement, your XXXXXXXXXX child began living only with you.
When both parents are required to pay a child support amount for the same child, subsection 118(5.1) of the Act allows one parent to claim these credits for that child providing the credits would otherwise be available. This is true even if the parents use a "set-off" arrangement, when one parent pays the other parent the difference of the child support amounts that both parents are legally required to pay.
Unfortunately, this only applies in cases where there is a clear legal agreement or court order that explicitly states that child support amounts must be paid. It does not apply if an agreement calculates the child support obligations using a method like the Federal Child Support Guidelines because only one parent has to pay the child support amount.
You state in your letter that if the payments were paid in a lump sum or were not specified by an agreement, you may have been allowed to claim these credits. A support amount is defined in subsection 56.1(4) of the Act and described in paragraph 4 of Interpretation Bulletin IT-530R, Support Payments. According to this definition, payments for a child that are not payable periodically or not required under an order of a court or a written agreement are not support amounts under the Act. Paragraph 118(5)(a) of the Act would not prevent the payer from claiming these credits for the child if the payments are not support amounts.
The CRA administers and enforces the Act as passed by Parliament. Tax policy and changes to the Act are the responsibility of the Department of Finance Canada. I am therefore sending a copy of our correspondence to the Honourable Joe Oliver, Minister of Finance, for his consideration.
I trust the information I have provided and the referral are helpful.
Yours sincerely,
Kerry-Lynne D. Findlay P.C. Q.C. M.P.
c.c.: The Honourable Joe Oliver P.C. M.P.
Minister of Finance
House of Commons
Ottawa ON K1A 0A6
Nancy Shea-Farrow
(905) 721-5099
2014- 053231