Divorce settlements can be tricky when it comes to taxes. In Canada, family law governs divorce issues, but it’s the tax man, also known as Revenue Canada, that makes the rules regarding the money that comes from a divorce settlement agreement. It all depends on how the money is or has been paid out.
When it comes to property, cash given for a matrimonial home is neither taxable nor tax-deductible. Spousal support funds made in a single payment are neither taxable nor tax-deductible. Any settlement agreement made between the couple should be formally written into a separation agreement, and each party should receive independent legal advice regarding their rights and responsibilities.
Are settlements taxable in Canada?
Legal documents like separation agreements will stipulate which areas are safe from taxation and which aren’t. Provinces and territories have their own laws when it comes to family or matrimonial property division, or the equalization of it. Not all provinces have the same laws, so seeking legal advice from a law firm specializing in family law will help clarify what tax rules apply to both you and your spouse when dividing assets.
A family law lawyer in Canada is well aware of the legalities accompanying divorce issues, such as separation agreements and the taxation of divorce settlement funds. A lawyer can help their client understand the complex details of any divorce agreement documents. Since these legal documents dictate how both you and your spouse move forward, it’s critical to have them reviewed by a professional. A lawyer may also be able to refer a client to others in a position to help, such as a divorce financial analyst.
How Kirk Montoute Dawson LLP Can Help with Your Divorce Settlement
If you are navigating the tax implications of a divorce settlement, spousal support, or child support obligations, you might find it helpful to seek legal guidance. At Kirk Montoute Dawson LLP, our divorce lawyers can ensure your separation agreement or divorce settlement agreement protects your financial interests under Canadian law. Contact us today to review your legal documents and secure a fair resolution.