It is now tax season and Jill has made an appointment with her accountant to finalize her yearly income tax return. Since Jill needed every penny she received in spousal support to make ends meet, she did not listen to her lawyer’s recommendation to set aside in her savings account 25% of the total income paid by Jack. She is now extremely stressed and wonders how much money she will need to return to the taxman. After speaking with her friend Susan, who has gone through a divorce a few years ago, Jill may have found a silver lining that may help her reduce the amount of income tax she owes. As explained by Susan, all Jill needs to do is ask her lawyer for a tax receipt indicating the total amount of the legal costs she incurred to either:
• establish the amount of support payments (child and/or spousal);
• collect late support payments;
• increase support payments (child and/or spousal); and/or
• defend against a request by the payer (Jack) to reduce established support payments.
If you are a recipient of child and/or spousal support, you can deduct, in your income tax return, the legal fees incurred to obtain, collect or increase support as well as defend a claim for the reduction of such support. The legal costs incurred by a recipient to resolve any other issues such as property and parenting cannot be deducted. Unfortunately, if you are the payer of child and/or spousal support, you cannot claim legal costs incurred to establish, negotiate, or contest the amount of support payments.
Your lawyer, if asked, will be responsible to prepare the tax receipt and determine the amount of legal costs you spent in the year to deal with the support issues mentioned above. So if you believe that some of the legal fees you incurred this year qualify as a tax deduction, don’t forget to ask your lawyer for a receipt!
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