Some legal fees paid in a family law matter are eligible for a tax deduction. Legal fees that are not deductible include those incurred to obtain a separation or divorce, to establish custody or access arrangements for a child, or to determine the division of family property. Legal fees paid that relate to child and/or spousal support payments may be tax deductible.
Child or Spousal Support Recipients
Under “carrying charges and interest expenses” on line 22100 of the T1 General Form, a child or spousal support recipient can deduct legal fees related to support payments from their current or former spouse or common-law partner, or from the natural parent of their child. More specifically, support recipients can deduct legal fees incurred to:
- Establish eligibility to child and/or spousal support;
- Establish the amount of support owing from a current or former spouse and/or parent of a child;
- Collect late support payments;
- Obtain an increase in support payments; and
- Defend against a reduction in support payments.
A support recipient may deduct the above legal fees even where his or her claim is not successful as long as the claim had a reasonable chance of success.
If the Court awards costs to the person claiming child and/or spousal support, the tax deduction claim for the legal fees for that claim must be reduced by the amount of the costs award. If the costs award is received in a future year, that amount must be included in the recipient’s income for that year.
Child or Spousal Support Payors
Unfortunately, payors of child or spousal support are not eligible to claim a deduction for legal fees related to establishing, negotiating or contesting the amount of their support payments.
What do you need to provide?
The Canada Revenue Agency requires evidence of the legal fees that have been claimed as a deduction, such as a letter from the taxpayer’s family law lawyer or copies of their invoices that clearly show that the fees were paid in relation to establishing and/or obtaining child and/or spousal support. It is a good idea to speak with your family lawyer well in advance of the tax filing deadline to ensure that you have the necessary supporting documents.