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Owl with focused gaze in soft light, symbolizing mental endurance and calm resilience during divorce
WISDOM

Divorce and Taxes

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What is important to understand about divorce and taxes in Ontario?

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How Divorce Has Tax Implications

Divorce is emotional. It is also financial. When businesses, investments, pensions, or real estate are involved, you need more than just a lawyer or mediator. You need a Money Smart Team that works together to understand the full picture.

The Common Sense Divorce Team of legal and financial professionals work together to protect your interests, your investments and your future. From uncovering tax risks to dividing investments and structuring fair agreements, we know how to get it done properly.

Work with a Divorce Money Pro, a certified divorce financial analyst (CDFA) who can walk you through every number and the long term outcomes of our decisions. Our Financial, Legal and Meidaiton Team ensures your decisions are smart, your documents are solid, and your financial future is protected.

Do not guess. Do not go it alone. Talk to us first.

Get Help With Your Divorce and Assets

During and following a divorce,
your tax situation changes significantly.
 Here are the most commonly asked questions.

When does the Canada Revenue Agency consider you separated?

The Canada Revenue Agency will consider you separated for tax purposes once you and your spouse or common law partner have been living apart for more than 90 days. This is different from how separation is defined under Ontario’s Family Law Act, where living in the same home but apart in practice can qualify as separation. For the CRA, separation starts counting only after you have been physically living at separate addresses for over 90 days. Once that time passes, your separation date is retroactive to the day you began living apart.

Legally, yes. You can be separated under Ontario family law while still living in the same house. But for tax purposes, the CRA will not recognize a separation unless you are living in different households. There are very limited exceptions, like having fully separate living spaces under the same roof. But if you continue sharing meals, finances, or parenting responsibilities, CRA will not treat you as separated for tax benefits.

Equalization payments made in cash are typically not taxed. You have already paid tax on that money. However, when you transfer other assets like cars or investments, there may be tax based on their increased value. There is a financial tool called the automatic rollover provision that can delay tax owed if assets are transferred as part of a formal separation agreement. This is why working with a divorce financial specialist can save you money and headaches.

Child support is not taxed for the parent receiving it, and it cannot be deducted by the parent paying it. Spousal support works differently. Monthly spousal support is taxable for the person receiving it and tax deductible for the person paying it. Lump sum spousal support is not taxed, but only if it is documented correctly in your separation agreement. Support payments also affect mortgage eligibility, so they must be planned carefully.

In most property transfers, land transfer tax must be paid. But if you are transferring your home between spouses as part of a properly prepared separation agreement, that transfer is exempt from land transfer tax. This is one of the many reasons to make sure your separation agreement is done right.

RRSPs can be transferred between spouses during a divorce without tax consequences, but only if done under a formal separation agreement. You also need to file the CRA form T2220 along with your agreement to avoid triggering taxes. If you skip this step, you may be taxed immediately on the transfer amount.

Changing your marital status can impact your eligibility for benefits like the Canada Child Benefit and GST/HST credits. You must inform CRA of your new marital status either through their “My Account” service or by submitting Form RC65. If you do not update your marital status, your benefits may be delayed or calculated incorrectly.

If you are separated or divorced and children live primarily with you, you may be entitled to the Canada Child Benefit. In different sex relationships, CRA typically assigns the benefit to the female parent unless otherwise requested. In same sex relationships, one partner will receive the full benefit. Both parents must file their tax returns every year to continue receiving the benefit.

If your marital status has changed and you did not apply for the GST/HST credit earlier, you can apply now by contacting your tax office. CRA will then issue a GST/HST credit notice with the amount you are eligible for.

If your marital status changes, you must submit a new application for the Working Income Tax Benefit advance payments. If you do not, your current payments will stop. The deadline to reapply is August 31.

If your banking details change after a divorce, make sure to update them with CRA. This ensures your benefits go to the correct account. If you are not on direct deposit, CRA recommends registering to avoid delays.

What Do I Need To Know About Divorce and Taxes?

Avoid costly mistakes—know your rights and responsibilities in Ontario. Move forward with a solid plan! Answer a few quick questions and instantly receive your FREE Ontario Divorce Plan specific to your situation. Start now and take control of your future!

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Tax Implications Are EVERYTHING In A Divorce

When you’re going through a divorce in Ontario, understanding the tax implications isn’t just a smart move—it’s absolutely essential if you want to avoid unpleasant surprises down the road.

Let’s break down a common issue: splitting assets. Imagine you and your spouse have $100,000 in a bank account and another $100,000 in an RRSP. You decide to split it evenly—your spouse takes the cash, and you take the RRSP. Seems fair, right? Not quite.

Your spouse walks away with $100,000 in hand, tax-free. But the $100,000 RRSP you took comes with a tax hit when you withdraw it. If there’s a 20% tax, you’re left with $80,000. That’s a $20,000 difference.

To make things fair, you’d need an extra $10,000 from the cash. So, instead of just taking the RRSP, you also get $10,000 from the bank account. Now, both of you end up with $90,000.

The takeaway? Divorce isn’t just about splitting things evenly—taxes play a big role too. The Common Sense Divorce helps people get it right.

Thinking of Divorce? First Things First

How much a divorce will cost, how acrimonious it will be, and what the future looks like, is decided by you… right now – before your first move.

STOP - BREATHE - THINK

Before anything, do your homework. Know your gameplan. 
ASK YOUR SELF THESE 10 QUESTIONS:

  1. Am I ready to make a decision – be it to stay or to leave?
  2. Is now the best time to separate?
  3. If I decide to stay, what are the financial, emotional or safety risks?
  4. What do I have to do to create a smart financial plan for myself (and my children?)
  5. Do I understand how Ontario Law divides our stuff; both our assets and our debts?
  6. Do I actually know what’s involved with Child or Spousal Support?
  7. Does it make sense to try and keep my home or can I make a wiser money plan?
  8. If my spouse is “difficult,” do I have a solid strategy on how to navigate through this?
  9. Can I articulate my negotiation options and then choose the wisest legal process for my situation?
  10. What can I do now to land on the best foot forward for myself (and my children?)

BEFORE YOU HIRE A LAWYER, MEDIATOR, OR GO TO COURT

Gain Confidence, Clarity and a Strategic Plan
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Feeling lost in the maze of separation? Our 90-minute Divorce Discovery Zoom Session cuts through the confusion and will help you make a decision, make a plan and understand your first steps.

SOLO

Solo Discovery Session
$399

For individuals who have not yet made a decision or need to equip themselves with the right information. The SOLO Discovery Session will answer your questions, explain Ontario Law in simple English and give you the information you need to make your next decisions.

  • Guidance before the talk with your spouse
  • Understand your rights & options
  • Learn how to start the conversation
Schedule

JOINT

Joint Discovery Session
$399

For couples seeking a legally smart and financially-savvy divorce. Addressing misconceptions and understanding options together is invaluable. The JOINT Discovery Session will align you and your spouse with facts—not opinions— the first step towards a smarter separation.

  • Minimize miscommunication
  • Address misconceptions together
  • Get on the same financial and legal page
Schedule

CHOOSE WISDOM
Whether attending solo or jointly as a couple, keep your separation straight-forward, amicable and cost effective.

Get straight talk about the legal and financial realities of divorce in Ontario.

It’s the information you need to make informed decisions.

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