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When do you officially separate?

Before getting into the various measures on your tax return that get affected by a separation, let’s understand when you officially separate from your spouse.

A separation is recognized when you have been living apart from your spouse or common-law partner because of a breakdown in the relationship for a period of at least 90 days and you have not reconciled. After this 90-day period, the effective day of the separation status is the day you started living apart.

Transfer of assets

Transfers done between ex-spouses for a settlement of rights arising out of their marriage or common-law partnership are tax exempt. For depreciable properties (like real estate) or other non-depreciable properties (shares in stocks), the transfer of the assets is done at cost.

When it comes to registered accounts, such as RRSPs, RRIFs and TFSAs, transfers done between ex-spouses for a settlement of rights arising out of their marriage or common-law partnership are also tax exempt.

Child Care expenses

Child care expenses are a deduction on your tax return for child care expenses paid for the care of your child while you’re at work or school.

Each parent may only claim childcare expenses incurred for a period during the year that the eligible child resided with the parent and only to the extent that the expenses were paid by that parent to enable that parent to work.

In shared custody situations, one parent (the first parent) may pay the child care provider and be reimbursed for a portion of the child care costs by the other parent (the second parent). The first parent should issue a receipt to the second parent for the amount of the reimbursement.

Spousal amount and eligible dependant credits

The spousal amount is a non-refundable tax credit you can claim when your spouse has low income in the year (less than basic personal amount of $15,705 for 2024). It can be claimed in the year of separation since the Income Tax Act (ITA) specifies that the criteria only need to be met “at any time in the year”. The net income used to determine the credit is the income of the ex-spouse up to the date of separation.

The eligible dependant amount is a non-refundable tax credit given to a single parent supporting their child. Just like the spousal amount, it can also be claimed in the year of separation since the criteria only need to be met “at any time in the year”. The credit cannot be split between both ex-spouses; only one parent can claim the amount. If there are multiple eligible dependants, one parent may be able to claim the eligible dependant amount for one child, and the other parent may be able to claim the credit for another child in a joint custody situation.

In the year of separation, the eligible dependant amount and the spousal amount are mutually exclusive; you an only claim one or the other, but not both.

Canada Child Benefit

The Canada Child Benefit is a tax-free monthly payment made to eligible families to help with the cost of raising children under 18 years of age

The benefit is calculated on an individual basis the month after the separation once the government has been notified. Once notified the federal government can go back 11 months and recalculate the benefit retroactively.

Guaranteed Income Supplement

The Guaranteed Income Supplement (GIS) is a monthly payment you can get if you are 65 or older and have low income.

Once the separation has been declared to Service Canada, the benefit is recalculated, excluding the income from the ex-spouse, three months (90 days) after the separation.