What are the tax advantages of a properly prepared separation agreement in Ontario?

The main tax advantage is that where spousal support is paid under the agreement in a certain amount each month (or each regular period — e.g., weekly, or quarterly) the amount is deductible from the payer’s income for the purpose of calculating income tax and includible in the payee’s income for tax purposes. This is a saving in tax for the family if, because of a difference in tax rates, the total tax paid by the two persons is less than the amount they would have paid had there been no support involved and thus no support deduction being available. (This deductible/includible rule applies only to spousal support, and not to child support.)

Gary Joseph and Michael Stangarone are lawyers with Toronto’s MacDonald & Partners family-law firm.