CRA Tax Rules for Spousal Support: When You Can (and Can't) Claim the Deduction

Spousal support is tax deductible for the payor and taxable income for the recipient. But CRA has strict rules about what qualifies—and informal payments, no matter how well documented, don't count.

This is one of those gotchas that costs people thousands of dollars. They start paying support right after separation, thinking they're doing the right thing. A year later, they file taxes and learn that none of those payments were deductible because there was no written agreement or court order.

The Basic Rule: You Need a Written Agreement

CRA is very clear on this: you can only deduct spousal support payments if you have either:

1. A court order requiring the payments, OR
2. A written separation agreement signed by both parties

That's it. Handshake deals don't count. Verbal agreements don't count. Text messages saying "I'll pay you $2,000 a month" don't count. Even a detailed email chain where both parties clearly agree to the terms doesn't count.

If you don't have a court order or formal written agreement, you cannot deduct the payments—and you don't have to report them as income on the receiving end.

Why This Matters: The Math

Let's look at why the tax treatment of spousal support actually matters.

Now imagine Michael had been paying that $30,000 informally without a written agreement. No deduction. He'd owe roughly $12,000 more in taxes than necessary. And Patricia wouldn't have to report the income—so she actually comes out ahead while Michael gets hammered.

What Your Written Agreement Must Include

Not every piece of paper qualifies. Your separation agreement or court order needs to:

• Be signed by both parties (for agreements—court orders are signed by the judge)
• Specify dollar amounts—"reasonable support" isn't good enough
• State the payment schedule—monthly, bi-weekly, whatever
• Clearly label it as "spousal support"—not just "support"
• Separate spousal support from child support if both apply

That last point is critical. We'll get into it below.

Spousal Support vs. Child Support: The Tax Difference

The tax treatment is completely different:

Type of Support	For Payor	For Recipient
Spousal Support	Deductible	Taxable income
Child Support (post-April 1997)	Not deductible	Not taxable

Child support is tax-neutral—neither party gets a tax benefit or burden. Spousal support shifts the tax burden from the higher-earning payor to the lower-earning recipient.

The "Unspecified Support" Trap

Here's where people get burned: if your agreement says you'll pay "$3,500 per month in support" without specifying how much is spousal and how much is child support, CRA treats the ENTIRE amount as child support.

That means zero deduction for the payor.

This isn't rare. I've seen separation agreements drafted by non-lawyers that lump everything together because the couple didn't realize the tax implications. Sometimes even lawyers miss this if they're rushing.

Registering Your Agreement with CRA

Once you have a written agreement or court order, you should register it with CRA using Form T1158 (Registration of Family Support Payments).

Is this mandatory? Technically no. But here's why you should do it anyway:

• CRA can verify your payments are legitimate support
• Both parties will report consistently (reducing audit risk)
• It creates a clear record if there's ever a dispute

Think of T1158 as insurance. It takes 10 minutes to file and can save you hours of explaining yourself to CRA later.

What About Retroactive Support?

Sometimes support agreements are made retroactive—your ex owes you support dating back to the separation date, not just from when the agreement was signed. Or maybe payments fell behind and now there's a lump sum to catch up.

The tax treatment gets tricky here.

Retroactive Periodic Payments

If your court order or agreement says support is owed retroactively—say, "$2,000/month starting from the date of separation"—and you pay a lump sum to catch up on those arrears, that lump sum can still be deductible.

The key is that the payments represent periodic amounts that were already owed. You're not making a one-time property transfer; you're catching up on regular support payments that were always due.

Form T1198: Spreading the Tax Hit

Here's a useful provision most people don't know about: if you receive a lump sum of $3,000 or more in retroactive support, you can ask CRA to tax it as if it were received in the years it actually applied to.

The payor fills out Form T1198 (Statement of Qualifying Retroactive Lump-Sum Payment) and gives it to the recipient. The recipient can then request that CRA recalculate their taxes for the relevant prior years.

Third-Party Payments

What if instead of paying your ex directly, you pay their rent? Or their mortgage? Or their car payment?

These "third-party payments" can qualify as deductible support—but the documentation matters more than ever.

For third-party payments to be deductible:

• Your court order or written agreement must specifically allow them, OR
• You must have written consent from your ex to make payments directly to third parties

Without that documentation, you're just paying your ex's bills. Generous, maybe, but not deductible.

Common Mistakes That Cost Thousands

1. Paying Informally First, Formalizing Later

This is the most expensive mistake. You start paying support right after separation because you want to do the right thing. Six months later, you get a separation agreement. But those six months of payments? Not deductible.

The fix: Get at least a basic written agreement—even a simple letter signed by both parties—before you start making payments. You can always replace it with a more comprehensive agreement later.

2. Not Separating Child and Spousal Support

Your agreement says "support" without specifying which type. CRA treats it all as child support. Zero deduction.

The fix: Always have two separate line items: "Child support: $X per month. Spousal support: $Y per month."

3. Using Vague Language

"Reasonable support" or "support as needed" doesn't cut it. CRA wants specific dollar amounts.

The fix: Exact amounts, exact dates, exact payment schedule.

4. Paying Cash Without Records

Even with a written agreement, you need to prove you actually made the payments. Cash leaves no paper trail.

The fix: Pay by e-transfer, cheque, or bank transfer. Keep records. Always.

5. Being Behind on Child Support

Here's a sneaky rule: CRA requires that you be current on child support before you can deduct spousal support. If you're in arrears on child support, any payments you make go to child support first—which isn't deductible.

The fix: Stay current on child support. If you can't, deal with it through proper channels (variation application, etc.)—don't just let arrears build up.

For Recipients: Don't Forget to Budget for Taxes

If you're receiving spousal support, remember: it's taxable income. CRA expects you to report it and pay taxes on it.

This catches people off guard. You're receiving $2,000/month, feeling like you have $2,000/month to spend. But when tax season hits, you might owe $400-600/month worth of taxes on that income, depending on your bracket.

Some tips:

• Set aside 25-30% of your spousal support for taxes
• Consider making quarterly installment payments to CRA
• Remember that support income can affect GST credits and other means-tested benefits

Try the Calculator

Want to see how support affects your overall financial picture? Our calculator helps you understand the range of support you might pay or receive.

Remember: the calculator shows gross amounts. Factor in taxes when budgeting—payors get a deduction, recipients owe taxes.

---

---