“Life isn't fair. It's just fairer than death, that's all.”  William Goldman, “The Princess Bride”

Almost no one believes the way the Income Tax Act deals with the deductibility of legal fees for matrimonial litigation is fair.  We don’t.  Even the people who get the benefit – and are happy with the law – can’t find a rational argument that the way the Income Tax Act is interpreted by the Canada Revenue Agency (CRA), to deal with what legal fees can and can't be deducted from income for income tax purposes is "fair".  And many people who can benefit from the law as it is, don't seem to know about it.  

While the issue of who can deduct legal fees from their income as an expense in family law litigation may not be "fair", it’s certainly straightforward.    And the simple fact of life is that the vast majority of Canadians who benefit from this are women.  

Basically the person in receipt of any support payment for either or both of child support or spousal support, the “support recipient”, can deduct their fees from their income in the year they were paid to the extent they were for the items listed below:

• obtaining an order for child or spousal support
• varying the amount of support being received
• opposing a claim to reduce support
• enforcing an existing court order or separation agreement to collect child or spousal support

If you're the person getting the money you can deduct your fees.  If you’re the person paying it, you can’t.  

If you’re the recipient of child or spousal support you should ask your lawyer to send you a letter stating that during the year in which you paid fees a specific percentage or amount was directly related to those support issues.  Then you can attach the letter to your Income Tax return and deduct the amount set out less any amount of legal costs awarded by the court and received related to the same support issues. 

Fees paid to prevent an even higher support order, or to show why the claim is wrong, even if you’re successful, can't be deducted.

If this is new information for you and you had some expenses you could have deducted in a prior year but didn’t, we suggest you speak with your accountant about the cost-effectiveness of re-opening your taxes so you can get the benefit.  If this makes sense for this year, remember to check about claiming it. 

If you spent, for example, $10,000 for legal fees in a family law matter this year and your lawyer could reasonably say that 60% of it, or $6,000, was for child or spousal support issues, or both, get a letter to that effect from him or her. Attach that letter to your Income Tax return and you can deduct the amount attributable to support from your taxable income after accounting for whatever the court awarded and you received from the other party.  You’ve now got a tax deduction of $6,000.  Not bad.

Fees related to the divorce itself or property issues, or fees related to custody or access issues, aren’t deductible legal fees. 

The payor, the person who may have offered a ‘fair” amount from the beginning, or who is incurring legal fees to defend an “unfair” claim, doesn’t get to deduct his or her legal fees.  Only the person who ends up being the support recipient gets the right to deduct the legal fees from their income in calculating their income taxes.

So, legal fees incurred to get spousal or child support are legally deductible from the income of the recipient for Income Tax purposes but the fees opposing that claim, or even to keep it reasonable, aren’t.  That may not be fair, but that’s the way it is.  As Johnny Carson once said: “If life was fair, Elvis would be alive and all the impersonators would be dead.”

For a more technical discussion of the issue raised above see the CRA website to read their Income Tax: Technical News, No. 24, October 10, 2002 here.

By Joel Miller Joel is a partner at Ricketts, Harris and the Chair of the firm's Family Law Group. He may be contacted at 416 364-6211 or by email at jmiller@rickettsharris.com.

Back to Top
Email this Page to a Friend