Blog: Deductibility of legal costs and professional fees incurred to obtain or establish support payments

January 30th, 2017 Deductibility of legal costs and professional fees incurred to obtain or establish support payments

Legal costs and professional fees incurred to obtain or establish support payments can be deducted in computing a taxpayer’s income. Under federal legislation, the deductibility of such costs depends on whether the taxpayer is the recipient or the payer of child/spousal support. Only the recipient is entitled to benefit from the federal deduction. Under the Quebec legislation, the deduction of legal costs and professional fees is allowed for both the payer and the recipient.

 

Both legislations treat legal costs and professional fees incurred to obtain or establish taxable and non-taxable support payments on an equal footing.

Legal costs and professional fees incurred to obtain or establish Child Support/Spousal Support
  Federal Legislation Quebec Legislation
Payer Non-deductible Deductible
Recipient Deductible Deductible

 

Legal costs and professional fees paid to negotiate a divorce or a separation agreement, or to establish child custody or visitation rights are not deductible.

Practical considerations: DT Max

In the federal tax return, the deduction for legal costs and professional fees incurred to obtain or establish support payments is found on line 221 as “carrying charges”. In the provincial tax return, it qualifies as “other deductions” on line 250. The relevant DT Max keyword is “Legal-Fees-Alim”.

Given the difference in treatment between the federal legislation and the Quebec legislation, the tax preparer claiming a deduction for legal costs and professional fees incurred by the payer of support payments must add a jurisdiction amount in the data entry in order for the deduction to appear only on the Quebec return. Such distinction is not needed when the taxpayer is the recipient of support payments since the deduction is allowed by both jurisdictions.

If you require additional information or clarification please do not hesitate to contact the tax group.

About the Author:

Élisabeth Daigneault, LL.B., M. Tax, is a Tax Specialist at Crowe BGK.

Connect with her: e.daigneault@crowebgk.com

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