Splitting Child Tax Credits, Deductions and Benefits When You Share Custody

In situations where there is shared custody of a child (i.e. separation or divorce), there can be complications regarding tax considerations, specifically when it comes to dividing tax credits, deductions and benefits received in regard to raising your children.

Two such benefits are;

1. the Goods and Services Tax/Harmonized Sales Tax (GST/HST) Credit;
2. and the Canada Child Benefit (CCB), introduced in 2016, which is paid to eligible families to help with the costs associated with raising children under the age of 18.

Since 2011, parents with shared custody could both claim these benefits. However, it was equal to one half of the entitlement that would have been received if the parent were the only eligible recipient - i.e. the child(ren) lives with them 100% of the time.

To benefit from this tax treatment, the child would have to have lived with each parent 40 to 60% of the time.

In March of 2019, however, this policy was altered by a court decision, requiring the child to live with each parent 45 to 55% of the time.

As a result of this judgement, the Canada Revenue Agency (CRA) has proposed an amendment to the Income Tax Act (ITA) for determining CCB and GST/HST Credit eligibility to minimize the effect of these changes on families. Under these rules, a shared-custody parent is defined as:

• One of two parents that are not cohabiting spouses or common-law partners of one another, who fulfil the responsibility of raising the child(ren) and reside with the child(ren) at least 40% of the time in a month on a near equal basis.

A near-equal basis can include living with one parent for three days and another for four, alternating weeks, or any other regular custody cycle where the time spent with each parent is nearly equal.

By modifying the ITA this way, the CRA is ensuring that child benefits, credits and deductions, as they relate to shared custody families, will continue to be administered as they previously have been.

For more information on tax implications of shared custody, contact Koroll & Company today.