May 28, 2021
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We discussed this issue briefly in the March 2021 Tax Letter (under “Ten Most Common Tax Mistakes”). More details are provided here.

In general terms, child support payments made to an ex-spouse or common-law partner are not deductible for the payer, and are not included in the recipient’s income. An exception applies if the applicable court order or agreement was made before May 1997, it was not amended or replaced by another order agreement after April 1997, and the parties did not elect to have the current rules apply. (This almost never happens now, since most child support stops around age 18.) In these rare cases, the payer can deduct the child support payment and the recipient must include them in income. 

On the other hand, spousal support payments are generally deductible for the payer and included in the recipient’s income, as long as certain conditions are met. If the conditions are not met, there is no deduction and no inclusion.

The general conditions include the following: 

  1. The spousal support payment must be a payment made as an “allowance on a periodic basis”. So normally, a lump-sum or amount that is not periodic does not qualify (some exceptions are noted below). The courts have held that the following factors are relevant in determining the periodic allowance issue: 
  • The length of the periods in which the payments are made. Amounts that are paid weekly or monthly are more easily characterized as allowances. Where the payments are at longer intervals, the issue is less clear. If the payments are made at intervals of greater than one year, the CRA and ultimately a court may rule that they are not periodic allowances.

  • The amount of the payments in relation to the income and living standards of payer and recipient. Where a payment represents a substantial portion of the payer’s or recipient’s income, the payment is unlikely to be a periodic allowance. On the other hand, where the payment is no greater than might be expected to be required to maintain the recipient's standard of living, it is more likely to qualify as an allowance.

  • If the payments include interest up to the date of the payments, a court may rule that this is essentially a lump-sum amount that the payer was allowed to pay over time, rather than a periodic allowance.

  • A periodic allowance commonly applies either for an indefinite period or until some event such as the re-marriage of the recipient, or some other event that causes a material change in the recipient’s financial needs. Sums payable over a fixed term may be regarded as not being a periodic allowance and therefore not deductible for the payer or included for the recipient.

  • If the payments release the payer from future obligations to pay support (for example, upfront payments for a few years rather than over many years), the payments may be viewed as not being periodic allowances.

  1. The recipient must have discretion over the use of the payment, meaning that the recipient, rather than the payer, determines what to do with the funds. So if the payer sends the funds with a condition that they be used in a specific manner, the payment may not qualify (an exception to this rule is discussed below).

  1. The recipient and payer must be living separate and apart because of the breakdown of their marriage or common-law partnership. 


  1. The payment must be pursuant to a court order or a written agreement between the parties. 

Exception to the general rules

There is a specific provision that overrides the general rules that a spousal support payment must be on a periodic basis and that the recipient must have discretion over the use of the funds.

A lump-sum payment can be deductible for the payer and included for the recipient, even though it is not periodic, the recipient does not have discretion over the use of the funds, and even if the payment is made to a third party instead of directly to the recipient. This specific provision applies only if the court order or agreement states that the parties agree that the provision will apply. The provision can apply to expenses such as medical expenses, tuition, rent, and mortgage payments made by the payer to the recipient or to a third party (for example, a medical facility, school, landlord, or bank). In the case of mortgage payments (principal and interest) made for the recipient’s home, the deduction in each year is generally limited to 1/5th of the principal amount of the original mortgage loan.

In addition to this special rule, the CRA takes the view that a lump-sum payment is deductible for the payer and included for the recipient if the lump-sum:

• represents amounts payable periodically that were due after the court order or written agreement and that had fallen into arrears; or

• is paid pursuant to a court order and in conjunction with an existing obligation for periodic maintenance, whereby the payment represents the acceleration, or advance, of future support payable on a periodic basis, for the sole purpose of securing the funds to the recipient, or

• is paid pursuant to a court order that establishes a clear obligation to pay retroactive periodic maintenance for a specified period prior to the date of the court order.

Payments made before court order or agreement

To be deductible, a spousal support payment must be made “pursuant to” a court order or written agreement between the parties. As a result, payments made before the court order is issued or before the agreement is signed would normally not be deductible for the payer or included for the recipient. 

However, another provision in the Income Tax Act says that payments made before the court order or written agreement can be deductible for the payer and included for the recipient, if the court order or agreement states that this provision applies. However, this applies only to payments made in the same calendar year as the order or agreement, or the immediately preceding calendar year.

Ordering rule with spousal and child support 

If both spousal support and child support are paid each year on a timely basis, this ordering rule is of little significance. However, if the payments are not made in full in any year,  this rule applies. In general terms, the support payments will be applied towards (non-deductible) child support until it is paid in full, before they are applied towards (deductible) spousal support. 


Ahmed is required under a court order or written agreement to pay $60,000 in annual child support and $40,000 in spousal support, for a total of $100,000. In 2021, because of cash flow issues, he pays total support of only $80,000. 

Under the ordering rule, the first $60,000 of the $80,000 paid in 2021 will be considered child support and therefore not deductible in computing his income. The remaining $20,000 will be considered spousal support and deductible. 

In 2022, Ahmed has better cash flow and therefore pays a total of $120,000 – being the $100,000 of total support owed in 2022 plus the $20,000 shortfall in 2021. Therefore, in 2022 he can deduct $60,000, which is the $20,000 shortfall from 2021 plus the $40,000 spousal support for 2022.

His ex-spouse has to include in income the same amounts that are deductible to him.

This letter summarizes recent tax developments and tax planning opportunities from a third-party affiliate; however, we recommend that you consult with an expert before embarking on any of the suggestions contained in this blog post, which are appropriate to your own specific requirements. Please feel free to get in touch with Lee & Sharpe to discuss anything detailed above, we would be pleased to help.
Douglas K. DeBeck

Hello, my name is Douglas K. DeBeck, I am a partner at Lee & Sharpe.

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