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: Can separated parents each claim the wholly dependent person tax credit for a child they have custody of?
Position: Yes.
Reasons: Assuming all conditions of paragraph 118(1)(b) of the Act are met and none of the limitations in subsections 118(4) and (5) apply, each parent would be able to claim the wholly dependent person tax credit for the child they have custody of.
XXXXXXXXXX
2010-038043
P. Waugh
October 26, 2010
Dear XXXXXXXXXX :
Re: Wholly Dependent Person Tax Credit
I am writing in response to your letter of September 14, 2010 regarding the wholly dependent person tax credit (commonly referred to as the "equivalent to spouse" tax credit.) More specifically, you have enquired whether spouses who are separated could both claim this tax credit under paragraph 118(1)(b) of the Income Tax Act (the "Act") if each have custody of a child.
In the situation you described, the husband and wife are separated and have two children. They each have custody of one child and are both required to pay child support to the other based on their wages (i.e. the mother pays child support of $200 per month to the father for the child he has custody of and the father pays child support of $400 per month to the mother for the child she has custody of.)
Our Comments
Written confirmation of the tax implications inherent in particular transactions may only be provided by this Directorate where the transactions are proposed and are the subject matter of an advance income tax ruling submitted in the manner set out in Information Circular 70-6R5, Advance Income Tax Rulings, dated May 17, 2002. This Information Circular and other Canada Revenue Agency ("CRA") publications can be accessed on the Internet at http://www.cra-arc.gc.ca. Where the particular transactions are completed, the inquiry should be addressed to the relevant Tax Services Office. We are, however, prepared to provide the following general comments.
In general, where an individual does not claim a spousal tax credit under paragraph 118(1)(a) of the Act, the individual may claim the wholly dependent person tax credit under paragraph 118(1)(b) in respect of a wholly dependent person. In addition to other tests of eligibility described in detail in Interpretation Bulletin IT-513R, Personal Tax Credits, this credit is generally available in respect of children under the age of 18 who reside in a home with, and are wholly dependent for support on, the individual
who maintained the home in the year. Although custody arrangements are an important factor to be considered in the determination of whether or not eligibility requirements have been met, such determination will always depend on the facts of each individual case.
The word "support" is not specifically defined for income tax purposes and, therefore, takes its ordinary meaning. In general terms, in order for a child to be considered wholly dependent on a parent, the parent must be responsible for the usual day-to-day activities of raising the child, such as ensuring the child attends school, providing food, shelter and clothing, etc. In other words, the child would have to live with the parent during the days in question. This can be contrasted with situations where the parent only has visitation rights or "legal access" rights where the child would still be considered to be living with the other parent. Support is generally something that is given voluntarily but includes support under a legal commitment. Whether a child is wholly dependent on a parent "at any time in the year" is a question of fact and can only be determined by examining all of the facts in a given situation. For more information regarding whether a child is considered to be wholly dependent on a parent, please refer to IT-513R.
In addition to the conditions in 118(1)(b), subsections 118(4) and 118(5) of the Act impose further limitations, such as: an individual cannot claim the credit in a taxation year in respect of more than one person; the credit cannot be claimed by more than one individual for the same person or the same domestic establishment; the credit in respect of a person cannot be shared between otherwise eligible individuals; and no credit in respect of a person is allowed where an individual is required to pay a "support amount", as defined in subsection 56.1(4) of the Act, in respect of that person in the years following the year of marriage breakdown. Note that this last restriction applies even in cases where such support payments are not made or, if made, are not deductible.
Assuming all conditions of paragraph 118(1)(b) are met and none of the limitations in subsections 118(4) and (5) apply, where more than one child exists and each parent has custody of one of the children, each parent would be able to claim the wholly dependent tax credit for the child they have custody of (even when the other spouse has custody of another child) as long as the parent does not pay support for the child claimed under paragraph 118(1)(b). Further information on the conditions in 118(1)(b) and subsections 118(4) and (5) of the Act can be found in IT-513R.
We trust these comments will be of assistance.
Randy Hewlett
Manager
for Director
Ontario Corporate Tax Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch
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