Spousal and child support across the border: who pays tax?

Is child support taxable or deductible in Canada and the US?

Child support is neither income to the recipient nor a deduction for the payer under US federal law. Canada's usual rule is the same, but some older orders keep taxable, deductible treatment.

Canada's exclusion starts on the "commencement day": the day an order or agreement made after April 1997 is made. An older one gets a commencement day only through an election on Form T1157 that the payer and recipient both sign, a change to the child support amount, a later order that changes total child support, or a date the document sets. Income Tax Act, subsection 56.1(4), CRA Folio, paragraph 3.24.

Under an order or agreement with a commencement day, an undivided payment for a spouse and children is child support unless the document identifies a portion solely for the spouse. Calling the whole transfer "family support" can therefore prevent a spousal deduction.

When is spousal support deductible and taxable in Canada?

Qualifying periodic spousal support is generally deductible by the payer and taxable to the recipient under Canadian federal rules. A voluntary transfer or a payment labelled "support" does not automatically qualify.

The CRA's conditions are:

• The payer and recipient are current or former spouses or common-law partners, living apart because their relationship broke down.
• A court order or written agreement requires the payments.
• The payments are an allowance payable periodically for the recipient's maintenance.
• The recipient controls how the money is used.
• The payments go to the recipient or to an agent enforcing collection.

CRA: support payment conditions. The statute asks for an order of a competent tribunal or a written agreement, not a Canadian one; for parents who were never spouses it requires an order under provincial law. Where child support is also payable under an order or agreement with a commencement day, only an amount the document identifies as solely for the spouse counts as spousal support. Income Tax Act, subsection 56.1(4).

A payment to a third party counts only if the order or agreement provides for it and the recipient can redirect it at any time. CRA Folio, paragraphs 3.52 and 3.53. An order or agreement can also say that subsections 56.1(2) and 60.1(2) apply, so qualifying expense payments (medical or education costs, for example) count as support, and that payments made earlier that year or the year before count as paid under it. Income Tax Act, section 60.1.

Canada takes child support off first. Paragraph 60(b) subtracts from the support paid all child support that became payable on or after the commencement day for periods beginning on or after it, and amounts already deducted in earlier years. If the payer pays less than the full amount due, the deduction shrinks or disappears, even if the transfers were labelled spousal support. The recipient's taxable amount works the same way. Income Tax Act, paragraph 60(b), paragraph 56(1)(b).

How does the US tax alimony, and does the divorce order date matter?

US federal treatment depends on when the divorce or separation agreement was signed and whether a later change expressly adopted the new rule, not on the payment date. This page calls an agreement signed on or before December 31, 2018 and not changed to adopt it the older rule, and every other agreement the newer rule.

An amendment increasing payments does not, by itself, adopt the newer rule; check the actual wording. A divorce decree signed after 2018 that replaces an older separation agreement moves later payments to the newer rule; a separation agreement that stays in force as its own contract keeps the older rule. IRS Publication 504, Examples 3 and 4. Under the older rule, for agreements signed after 1984, deductible alimony must be:

• Paid in cash to or for a spouse or former spouse under the agreement.
• Paid when the spouses file no joint return with each other and, if legally separated by decree, do not share a household.
• Not payable after the recipient's death.
• Not child support, a property settlement or designated nondeductible and excluded.

IRS Topic 452. A reduction tied to a child's age or another child-related event makes that portion child support, even if labelled spousal support. A payment smaller than the child support and alimony due together counts as child support first. IRS Publication 504.

Canada covers common-law partners; the US rule refers only to spouses and former spouses.

I live in Canada and pay support to an ex in the US: what can I deduct, and is anything withheld?

A Canadian resident may deduct qualifying spousal support paid to a nonresident, and Canadian tax does not have to be withheld. Child support follows Canada's child-support rules. CRA: payments to a nonresident.

A Canadian deduction can coexist with a US federal exclusion under the newer rule. IRS Topic 452.

To claim the deduction, report total support paid under the order on line 21999 and the deductible portion on line 22000. CRA: support payments made.

I live in Canada and receive support from the US: is it taxable here if the US does not tax it?

It depends on the date of the US agreement. Canada includes qualifying spousal support from a US payer unless the treaty exempts it (CRA Folio, paragraph 3.66). Article XVIII(6)(a) leaves tax to the recipient's country, and (6)(b) exempts any amount the US would exclude if the recipient lived there (Canada-US convention).

On the last row, Folio paragraph 3.66 says only that a treaty may affect the result, and the Treasury explanation predates the US change.

If an exemption applies, the CRA describes reporting the support and claiming the treaty deduction on line 25600; keep the legal basis with your records. CRA: support from a nonresident. A US bank account does not decide residence or treaty entitlement. For currency and any foreign tax credit, use foreign income on a Canadian return.

I live in the US and pay support to an ex in Canada: can I deduct it?

A US citizen or resident filing Form 1040 may deduct qualifying alimony only under the older rule: an agreement signed on or before December 31, 2018 and not changed to adopt the newer rule. The newer rule gives no deduction, even if Canada taxes the recipient. Article XVIII(6) says which country taxes the recipient and creates no deduction for the payer (Canada-US convention).

For an older-rule deduction, obtain the recipient's SSN or ITIN and enter the agreement details on Schedule 1; a missing number can mean a US$50 penalty and a disallowed deduction. An alimony deduction cannot be claimed on Form 1040-NR. IRS Publication 504.

Older-rule alimony paid to a Canadian resident who is a nonresident alien for US purposes is in most cases taxable in the US and subject to withholding at the default rate of 30%. A payer who is a US citizen or resident can be the withholding agent. IRS Publication 515, 26 CFR 1.1441-7(a). Publication 515 says newer-rule alimony is no longer considered income, so that withholding applies only to alimony that is still taxable. A payer who fails to withhold is personally liable for the tax; interest and penalties remain even if the recipient later pays it. The IRS can generally assess within 3 years of a filed Form 1042, or at any time if none was filed. IRS Publication 515, liability for tax, IRM 3.22.110.

A treaty exemption from withholding depends on the support arising in the US and the recipient qualifying as a Canadian treaty resident (Article XVIII(6)(a)). A nonresident recipient claims it on Form W-8BEN with an SSN, ITIN or foreign tax identification number; a US citizen uses US-person documentation (W-8BEN instructions). Forms 1042 and 1042-S, when required, are due by March 15 after the payment year; an individual who need not withhold and pays outside a business may be excepted (Publication 515). The recipient's side is in US tax withheld on payments to Canadians.

I live in the US and receive support from Canada: is it taxable here?

A US resident receiving Canadian-source spousal support generally includes qualifying alimony under the older rule (an agreement signed on or before December 31, 2018 and not changed to adopt the newer rule); the newer rule excludes it. IRS Topic 452.

The treaty also excludes Canadian-source support to the extent Canada would exclude it if the recipient lived in Canada. It does not make all Canadian spousal support exempt in the US. IRS Publication 597, alimony.

A Canadian-resident payer does not have to withhold Canadian tax on support paid to a nonresident. CRA: nonresident support.

Does my state follow the federal alimony rule?

Not always. A state can treat alimony differently from the federal return, and this page checked only California. California uses a later cutoff, so an agreement excluded federally can still produce a California deduction for the payer and income for the recipient.

For agreements signed between January 1, 2019 and December 31, 2025, a Schedule CA adjustment may be required. Check amendments before using the table. California FTB: alimony, FTB Publication 1001.

The treaty covers US federal income tax, not state tax, so a federal treaty exemption does not decide the state return; verify the relevant state's law and your state residence. Convention, Article II.

Is a lump sum, property transfer or retirement transfer treated as support?

A Canadian lump sum replacing future support generally does not qualify as periodic support. A payment that catches up overdue periodic support can; a settlement releasing the payer from obligations generally cannot.

The CRA also treats instalments of a lump sum as generally not support, and distinguishes retroactive support clearly ordered for a specific earlier period from a lump sum under a written agreement. CRA: lump-sum payments. For the table: IRS Topic 452 excludes noncash property settlements, subsection 56.1(4) requires a periodic allowance, and CRA Folio, paragraph 3.68 covers pension payments.

Taxable catch-up support is reported in the year received. If you were resident in Canada and C$3,000 or more of a retroactive lump sum (interest excluded) covers earlier years, the payer gives you Form T1198 to include with your return for a special calculation. CRA: retroactive support received. For an RRSP, RRIF, IRA or 401(k) split, use dividing retirement accounts in a cross-border divorce.

I moved to the other country: which country taxes my support now?

Under the treaty, the country where the recipient is resident taxes support paid from the other country, except for amounts the source country would exclude. A recipient's move therefore changes which country taxes the receipt, while the payer's deduction follows the payer's own country's rules. The support order does not have to change. If both countries treat the recipient as a resident, Article IV(2) decides: permanent home first, then closer personal and economic ties, then habitual abode, then citizenship. Canada-US convention, Articles IV and XVIII(6).

Each country sets residence dates for itself, so recheck each period. See moving from the US to Canada, moving from Canada to the US and, for the old state's part-year return, US state tax after moving to Canada. The Treasury explanation notes that Article XVIII does not say where support arises; domestic-law rules decide. Treaty technical explanation.

Citizenship does not change when you move. The US taxes its citizens wherever they live; the residence rule in Article XVIII(6)(a) does not limit that, but the exemption in (6)(b) applies to citizens. A US citizen living in Canada applies the US rules above on the US return and the Canadian rules on the Canadian return. See Americans living in Canada and, for Canadian residence after a separation, Canadian tax residency. IRS Publication 597, technical explanation.

What records do the CRA and IRS expect?

Keep the signed order or agreement, every amendment and proof of actual payments: the signing dates, payment categories and death provisions can decide the tax treatment.

The CRA accepts cancelled cheques, transfer statements, enforcement-program statements and signed recipient receipts; keep them rather than enclosing them. CRA: payments made, payments received, registering an order.

Example

A Canadian resident pays an ex-spouse living in the US under an agreement signed after both the US federal and California cutoffs. The payer is not a US citizen or US tax resident. All Canadian support conditions are met and child support is current.

All figures are illustrative Canadian dollars. The order requires C$1,000 monthly spousal support and C$500 monthly child support. The payer makes all 12 payments: C$18,000, of which C$12,000 is spousal support and C$6,000 child support.

The payer reports C$18,000 on line 21999 and claims C$12,000 on line 22000. No Canadian tax is withheld. The newer US federal rule excludes the spousal support, and child support is excluded too. A California-resident recipient has no California income from it under the assumed newer California rule.

Two variations. If the agreement was signed in 2017 and never changed, the payer still deducts C$12,000, but a US-resident recipient includes the C$12,000 in US income; child support stays excluded. If the payer paid only C$12,000 of the C$18,000 due, Canada subtracts the C$6,000 of child support that became due, so the deduction is C$6,000. Both assume earlier years were paid in full: paragraph 60(b) also counts child support due and deductions in earlier years.

A Canadian recipient of US support must review the treaty interaction described above. CRA reporting, IRS alimony rules, California rules.

Different for you?

• US support excluded federally, but received in Canada; an older order; arrears; or a mid-order move: use cross-border tax services to review classification, treaty treatment and coordinated returns.
• Unsure whether both returns need to be prepared together: see when you need a cross-border accountant.
• US tax already withheld from support paid to you: see US tax withheld on payments to Canadians.
• A settlement uses retirement accounts: see dividing retirement accounts in a cross-border divorce.
• Still married to a spouse who lives abroad and considering a joint US return: see married to a nonresident.