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Can I Deduct My Lawyer’s Fees on My Income Taxes? – Our 4 Tips

Did you know that, in some circumstances, you may be able to deduct part of your family law legal fees on your income tax return? Read on for our top 4 things to know on this subject.

  1. Fees Spent on Asking for Child or Spousal Support May Be Tax-Deductible

    If you are asking to have child or spousal support paid to you, you may be able to deduct a portion of your legal fees on your income tax return. However, you can’t deduct everything – only the part of your legal fees which was spent on the child and/or spousal support claim. This means that if you are asking for other things at the same time – like a divorce, or having your family property divided – you will need to be able to show what was spent on which issues. The CRA may want a letter from your lawyer stating what percentage of your legal fees was spent on your support claim.However, as further explained below, you need to be asking for “periodic” support (i.e. support paid to you according to a regular schedule, such as monthly payments), and not “lump sum” support.

  2. Fees Spent on a Lump Sum Spousal Support Claim Are NOT Tax-Deductible

    A “lump sum” payment is a large, one-time payment meant to satisfy the entire support obligation. If you are asking for lump sum spousal support, you will probably not be able to deduct the portion of your fees which were spent on that claim. There are some exceptions to this rule – such as if the lump sum is meant to bring the other person’s historical support obligation up to date, rather than to end their obligation forever.

  3. Fees Spent on Defending Against a Child or Spousal Support Claim Are NOT Tax-Deductible

    This means that the person being asked to pay child or spousal support will generally not be able to deduct their legal fees on their income taxes. This is true even if you win your case and don’t end up having to pay any child or spousal support.

  4. Fees Spent on Parenting Issues are NOT Tax-Deductible

    This means that the money you spend on things like custody of your children, primary residence of your children, making a parenting schedule, and deciding who will make important decisions about your children’s care and upbringing all cannot be deducted on your income taxes.

Just because your fees might not be deductible if you ask for lump sum spousal support does not mean that you should never pursue it. There are many cases where a lump sum payment might still be the best financial solution even after taking the loss of the tax deductible into account. What’s best for you and your family will depend on your own circumstances, which is why it is important to take a thoughtful approach when pursuing your claim. If you want advice about what method might work best for you, make an appointment with one of our experienced family lawyers today.

Want more information about how child and spousal support payments can affect your income taxes? Take a look at our previous blog post: “How Do Child/Spousal Support Affect My Income Tax? – Top 6 Tips.

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Divorce Process – You Decided to Separate, Now What?

In this blog, we will discuss the following:

  • What constitutes a spouse, are you married or common law?
  • Limitation Periods – do you have the right to ask for support or property division?
  • You decided to separate – what does this mean?
  • So many options – Lawyers, mediators, arbitrators, courts…

Who is a Spouse?

In British Columbia, you are a spouse under the Family Law Act if:

  • You are or were married
  • You have lived with another person in a marriage-like relationship, sometimes called common-law, for a certain period of time

If you are common-law, you must have lived together for a minimum period of time to qualify as a spouse. In order to be considered a spouse for the purposes of dividing property or debt you must have lived together in a marriage-like relationship for at least two years.

But if you are applying for spousal support, you are considered a spouse if you have lived together in a marriage-like relationship for less than two years and have a child together.

Under the law, the start date of a spousal relationship is the day two individuals begin living together in a marriage-like relationship, or the day they were married, whichever is first.

Limitation Periods

If you fit within the meaning of a “spouse”, then do not forget about the Limitation Periods! Pursuant to section 195 of the Family Law Act, you must remember that a spouse can start a proceeding for an order for property division, pension division, or child and spousal support:

  1. No later than two (2) years after either divorce (if you were married) or;
  2. No later than two (2) years after you have seized leaving in a marriage-like relationship (two years since the separation).

Of course, these are serious rules, but sometimes not necessarily as stringent as they sound. For example, the running of the time limits set out above are suspended during any period in which you and your spouse have engaged in a family dispute resolution with a family dispute resolution professional. For example, if you and your spouse were involved in negotiations with your Family Justice Counsellor or there has been discussions between lawyers, the time limits have been suspended. If you are not sure whether your time limits are running out, we would suggest seeing a lawyer immediately for a consultation! It is worth it to find out about your rights and options and you do not necessarily have to hire that lawyer right away, you can leave and think about it!

Separation

Number one question newly separated clients ask is “what is legal separation and how do I do it?”. Should you draft a separation note and sign it? Should you agree on a date? In fact, no, you do not need to do any of this. You do not even have to move out of the house to be separated! The terminology used for separation is “being separate and apart”. Considering the cost of living reality in British Columbia, you can remain living in the same physical space, but still be separate and apart. Of course, if the living arrangements are not a practicable possibility due to conflict, then you should consider actually moving out. If you are amicable, perhaps you can stay in the home until you resolve your separation process! Once you decide to separate, then that is it. You can have a discussion about it and approximate the date of the separation. The date of separation is most important when it comes to time limits (see above), so again, do not hesitate to contact us for a consultation to discuss your options!

Options

This is the part of the consultation that depends heavily on your circumstances. A good lawyer will be able to quickly tell you what options seem good and which option should be avoided. For example, if you have already been served with a legal document filed in court, “wait and see” option hardly seems reasonable to suggest. However, if you have not even discussed your separation with your spouse, then “wait and see” option becomes viable and, in fact, rather sensible option (again, in cases when there are no conflicts or issues of violence). You do not have to go the route of lawyers and court should be the last resort in family law cases. You can consider discussing resolution with your spouse alone and drafting a separation agreement with the help of a lawyer or go through Family Justice Counsellors. However, when the issues become more complex, and you have to deal with parenting issues, division of debts and assets, figuring out business structure and incomes of parties, among many other issues, then you should seek consultation of a lawyer who will gladly guide you toward an option that is right for you!

Call us to make an appointment today at 604-477-1077 and we will gladly meet with you to discuss your particular situation!