Legal Fees and Taxes
Are you curious about legal fees and taxes? It’s that time of year again when everyone is trying to maximize their tax breaks. If you’ve been involved in family law litigation you should discuss whether or not you have any sort of tax breaks or benefits that may have resulted or changed from your case should be claimed. You should talk to both your accountant and your ClearWay Law lawyer about these potential tax breaks as each individual case may vary as to what tax breaks are available.
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The most common tax issue in family law is for those paying spousal support. You and your ex are required to claim spousal support in your annual taxes. This is because the government views it as a sort of wage payment. The party paying will receive a tax break. The party receiving is likely to have to pay a portion of the tax. This would depend on the amount depending on their annual income. Keep in mind that this only comes into effect where your spousal support is being paid in monthly installments. It will be applicable if there is a onetime payout of spousal support.
Legal Fees and Taxes
Have you have seen a change in the custody of your children? Are you paying a portion of the daycare expenses for your children? This may result in tax breaks for both yourself and your ex. You will need to determine who is claiming which child on their tax returns as there are additional tax credits available to those parents who are claiming a dependent child.
There are also government incentive programs that sometimes provide additional tax breaks for active families and certain activities however you need to make sure that only one of either yourself or your ex are claiming these on your taxes as a double claimed amount is likely to end in an audit of both your taxes and those of your ex-spouse.
Finally, in some cases, you can attempt to claim your total annual legal fees in your tax return if you have been forced to deal with issues of support variation or enforcement. That being said the Canadian Revenue Agency has very strict guidelines regarding claiming legal fees or debts owing for legal fees so you should always discuss these issues with your ClearWay Law lawyer and accountant before blindly claiming them on your tax return.
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If you have questions about legal fees and taxes call us toll-free at 844-466-6529