Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
Principal Issues: In a shared custody situation where a minor child resides with each parent approximately 50% of the time in a year, both parents are required to make support payments, and the child is diagnosed with autism and qualifies for the disability tax credit, whether each parent would be allowed to claim the eligible dependent tax credit, child tax credit, and the disability tax credit every other year.
Position: If each parent is required to make support payments for the child and otherwise meets the criteria set out in paragraph 118(1)(b) of the Act, each parent would be allowed to claim the above-noted credits every other year, providing all other requirements are met.
Reasons: See response.
XXXXXXXXXX 2012-044330
Ananthy Mahendran
March 27, 2013
Dear XXXXXXXXXX:
Re: Amount for eligible dependant (line 305)
Amount for children (line 367)
Disability amount transferred from a dependant (line 318)
We are writing in response to your correspondence dated April 2, 2012, wherein you asked for our opinion on your client's eligibility to claim the above-noted tax credits in the following circumstance.
Briefly, you described a shared custody situation where a minor child resides with each parent approximately 50% of the time in a year. Both parents are required to make support payments. The child is diagnosed with autism and qualifies for the disability tax credit.
Specifically, you would like to know whether each parent would be allowed to claim the above-noted credits every other year, if the parents include, in their separation agreement, a section allowing the tax credits relating to the child to be alternated between both of them each year. For example, the mother will claim the above-noted credits in "odd years" and the father will claim in "even years".
Our Comments:
Written confirmation of the tax implications inherent in particular transactions is given by this Directorate only where the transactions are proposed and are the subject matter of an advance income tax ruling request submitted in the manner set out in Information Circular 70-6R5, Advance Income Tax Rulings, dated May 17, 2002. Where the particular transactions are completed, the inquiry should be addressed to the relevant Tax Services Office. However, we are prepared to provide the following general comments, which may be of assistance.
Amount for an eligible dependant (wholly dependent person credit / eligible dependent tax credit)
Where in a taxation year parents live separate and apart, have shared custody of a minor child who resides with each parent approximately 50% of the time, and each parent is required to make support payments for the child and otherwise meets the criteria set out in paragraph 118(1)(b) of the Income Tax Act ("Act"), subsection 118(5.1) of the Act effectively allows either parent to claim the amount for an eligible dependant under paragraph 118(1)(b) for the child in the taxation year. Pursuant to paragraph 118(4)(b) of the Act, only one parent can claim the credit for a taxation year in respect of the same child. If the parents cannot agree who will claim this amount for the child, neither of them can make the claim.
Amount for children (child tax credit)
Generally, paragraph 118(1)(b.1) of the Act allows a parent of a child who is under the age of 18 years at the end of a taxation year to claim a child tax credit for each such child where:
(i) the child ordinarily resides throughout the taxation year with that parent together with another parent of the child; or
(ii) the child would qualify as a wholly dependent person of the parent under paragraph 118(1)(b) of the Act for the taxation year.
In circumstances where parents live separate and apart and have shared custody of a minor child in a taxation year, pursuant to subparagraph 118(1)(b.1)(ii) of the Act, the parent who claims the amount for an eligible dependant for the child under paragraph 118(1)(b) of the Act is entitled to claim the child tax credit for the same child in the taxation year. Pursuant to paragraph 118(4)(b.1) of the Act, only one parent can claim the child tax credit for the same child. If the parents cannot agree who will claim this amount for the child, neither of them can make the claim.
Disability amount transferred from a dependant (disability tax credit)
Subsection 118.3(2) of the Act provides for the transfer to an individual of all or part of a dependant's disability tax credit in certain circumstances. The person with the disability must have been resident in Canada at any time in the taxation year and dependent on the transferee for support (some or all of the basic necessities of life such as food, shelter, and clothing). Pursuant to clause 118.3(2)(a)(i)(A), the disability tax credit may be transferred to an individual from a person for whom the individual has claimed the amount for an eligible dependant under paragraph 118(1)(b) of the Act.
In the above-noted shared custody situation, the parent who claims the eligible dependent tax credit for the child for a taxation year is required to claim the disability tax credit for the same child for the taxation year, providing both parents are required to make support payments for the child and the parents agree who will claim the eligible dependent tax credit for the child in the taxation year. The parents cannot split the disability tax credit.
In summary, where in a taxation year parents live separate and apart, and have shared custody of a disabled child who is under the age of 18 years at the end of the taxation year and resides with each parent approximately 50% of the time, and each parent is required to make support payments for the child and otherwise meets the criteria set out in paragraph 118(1)(b) of the Act, it is our view that each parent would be allowed to claim the above-noted credits every other year, providing all other requirements are met.
We trust that our comments will be of assistance.
Yours truly,
Sharmini Ratnasingham
for Director
Business and Employment Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch
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