A Guide to Alimony, Its Requirements, and Tax Implications
Going through a divorce typically means handling many issues and smoothing out arrangements for a peaceful separation. Some of the things that would have to be discussed with your former spouse involve setting up child custody, child support, living agreements, division of assets and more.
While many of those will typically affect your finances, one arrangement that will be surely influential is paying alimony or spousal support. If a married couple cannot work out an alimony agreement in Canada, a judge will decide the matter based on state laws.
Getting financial advice and assistance is a must when it comes to getting the best results for your divorce, it is best to be fully aware of the possible requirements and implications of these arrangements. To get you started, here’s what you need to know about alimony:
Defining an Alimony Payment
In Canada, alimony is also known as spousal support payment that is paid to a spouse by the other spouse to provide support during the divorce or separation. The receiving party is usually a spouse who has been financially dependent during the marriage.
The reason why a person can receive alimony payments is based on their financial needs. This monetary support is usually provided until the receiving party is able to get back on their feet and become financially independent.
Determining the Alimony Type
There are plenty of alimony types in Canada, with each one varying in the specification. To simplify, the alimony would either be temporary or permanent. For temporary alimony, the payment usually ends when the party receiving the payments gets a stable income.
In rare cases, permanent alimony is an obligation that may come as an extension or a supplement to temporary alimony payments. The support is based on need, and it is given until the recipient passes away or remarries.
Clarifying the Common Requirements of Alimony
Alimony requirements in Canada can be different from one province to another, and it’s best to be aware of the provisions in your area. Consult a divorce financial expert for information about the specific rules and what you need to do.
Generally, alimony payments must be made on a regular basis while amount is fair and reasonable. The party requesting alimony should also be unable to financially support themselves to be legally eligible for spousal support, as the set-up is subject to approval.
Setting the Record Straight about Divorce Taxes
In Canada, alimony payments are not tax-deductible for the person paying and likewise, the receiving spouse cannot claim the sums to offset as income. The tax laws are set up to prevent a spouse from benefiting from receiving alimony payments.
If you are being requested to pay alimony, deduct the payment amount as a tax deduction, but this is only applicable if the court or legal document specifies the amount as a non-taxable payment. Situations may vary depending on the circumstances.
Conclusion
Alimony requirements have their ups and downs during a divorce. As you prepare for a divorce and figure out the regulations applicable in your area, it is best to hire a divorce financial expert to help you understand the process and get the best possible outcome for you.
Got inquiries about alimony in Alberta, Canada? Alberta Divorce Finances provides divorce financial planners in Calgary that can help you understand your finances. Get in touch with us today!
