Tax season is upon us once again. Did you know that you could qualify to claim certain legal fees on your taxes? Be sure to speak with your family lawyer about providing you with a letter if you qualify.
This could be a huge benefit or a missed opportunity if you do not have a letter outlining the portion of your legal fees for things such as: child support and spousal support payments on Line 22100 – carrying charges, interest expenses, and other expenses, or Line 23200 – other deductions in certain circumstances.
Canada Revenue Agency recently noted in Income Tax Folio S1-F3-C3 that a recipient of support can deduct legal fees to:
"Establish the amount of support payments from their current or former spouse or common-law partner; establish the amount of support payments from the legal parent of their child (who is not their current or former spouse or common-law partner) where the support is payable under the terms of a court order; an increase in support payments; defend against a reduction in support payments; collect late support payments; or request that child support payments be non-taxable".
In cases of separation and divorce, most of the time the legal fees are not limited to support issues and therefore your lawyer can assist you in determining the portion of their legal fees that was related to support. For example, if you filed for divorce and included a request for a parenting order, child support and a division of marital property and debts, only a portion of those legal fees will qualify.
You should note that only a recipient of support may deduct a portion of their legal fees and that a payor of support cannot deduct legal fees to "establish, negotiate, contest, reduce or terminate the amount of support payment".
There are certain exceptions when it comes to recipients making a claim as well and you should always speak to your accountant if you have any questions about making a claim for legal fees on your taxes.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.