Changes to the Eligible Dependent Tax Credit with Shared Custody in Nova Scotia.
In Nova Scotia shared custody arrangements child support is often calculated using the simple set off approach. This is a straightforward way of calculating child support and involves the following:
· Parent A’s income corresponds with a child support payment of $500.
· Parent B’s income corresponds with a child support payment of $100.
Under the set off method Parent A would simply pay Parent B $400 for child support.
The Tax Court of Canada decided in Harder v the Queen, 2016 TCC 197 that the set off approach didn’t comply with sections of the Income Tax Act. The Income Tax Act disallows a support paying person from claiming a tax deduction or benefit with respect to that dependent. According to the decision in Harder v the Queen the correct thing to do is for each shared custody parent to actually pay the full table amount to each other. The decision in Harder v the Queen disallowed the husband from claiming $15,000 in non-refundable tax credits.
Beyond the tax implications Harder v the Queen may further complicate a shared custody arrangement. If you feel you need to re-structure your custody arrangement because of this change be sure to contact a family lawyer for advice.
You can read more on these changes here:
https://www.cba.org/CMSPages/GetFile.aspx?guid=6d204fc9-64a7-4d08-93ee-90696c978246
If you have any questions about this subject, you can call us at (902) 826-3070 or email us at info@highlanderlaw.ca to set up a meeting with one of our lawyers at our Tantallon law firm. You can also schedule a no commitment Issue Review Consult for $500+HST where you have the opportunity to explain your situation to a lawyer and get basic advice before deciding whether or not you'd like to retain us.
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