“Oh my gosh! I can’t pay that much support! That’s more than half of my take home pay! There is something wrong with the calculations!”
We hear this often. No, the calculations are correct. What sometimes causes confusion is the fact that support calculations are based on ‘gross’ income before deductions, (some deductions are allowed, like Union Dues) while most people budget on take home pay or ‘net’ income. That is your gross income minus deductions for taxes, C.P.P., E.I. etc.
Child support is neither deductible or taxable however spousal support is deductible by the support payor and is taxed as income in the hands of the support recipient.
There are some simple things you can do to increase your deductions after separation so that you have more money in your paycheck each week.
First, register your support order or agreement with Revenue Canada using Form T1158E (15) which you can download here.
Secondly, complete and file with your employer a T1213 (14), also available to download here. This form sets out the amount you can claim for support payable and other things like Child Care Expenses and some Registered Retirement Savings Plan contributions.
There is a corresponding form for Ontario Personal Tax Credits, TD1ON E (15) and Federal TD1 E (15) are available here and here. You may also be able to claim a deduction for eligible dependants. Look at the forms carefully and get some help from your tax advisor as well.
The end result should put more money in your bank account so that the support orders make sense.
We’ve also added the T2220 E (14) (here) Revenue Canada form for tax free spousal rollovers of RRSP’s. This form is frequently required when the property issues are resolved.