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Tax Considerations in Family Law
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…prepared by Michael H. Murray LL.B

The following article provides a brief overview of some tax issues in the area of family law.

Many people have been or know someone who has been involved in a family law dispute. Legal proceedings are frequently technical and complex. The nature of the issues, the length of the proceeding and the expertise required to navigate your way through the court process all contribute to significant costs being incurred.

The good news is that there are circumstances where legal fees, or a portion thereof, may be treated as a deductible expense for income tax purposes.

Legal fees incurred to obtain child or spousal support are usually treated as a deductible expense. This treatment also extends to variations of such support including legal fees incurred to enforce an existing order or agreement.

Some areas where legal fees are not treated as a deductible expense would include costs incurred to obtain a divorce, property claims, or to address the issue of the custody of children.

For those who have been successful in securing an entitlement to child support, another tax benefit is that child support is not usually included in income for income tax purposes.

Unfortunately for the recipient spouse, spousal support does not have the same treatment as child support. Generally, the recipient of spousal support will have to declare the support as income and pay tax on the same. On the other hand, a benefit to the support payer is that they are able to deduct spousal support payments made when calculating their income tax.

Given the different treatment of child and spousal support for tax purposes, where arrangements are being made for the payment of a combination of child and spousal support, it is helpful to both parties to specify what amounts relate to each type of support i.e. Tom will pay Katie $500.00 per month in child support and $300.00 per month in spousal support.

There is much more to be said on these issues and clarification should be sought from experts in the relevant fields. If uncertain about any of these issues many lawyers, accountants and financial advisors offer free consultations.

Michael H. Murray MENEAR WORRAD & ASSOCIATES
Tel: (519) 672-7370 email: mmurray@menearlaw.com






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