Disability Tax Credit for Child where Parent pays Child support

I have a client who is divorced and pays child support and spousal support. Because he pays child support, he is unable to claim the amount for eligible dependant and unable to claim the disability tax credit transferred from the child. Why is Taxcycle allowing these claims? I have to turn off the claims manually on the dependant worksheets. There is even a review message in Taxcycle telling me to consider claiming the amount for eligible dependant. Disappointed that Taxcycle is not more intuitive to connect that support payments were made in respect of the child.

@Cameron maybe support payments should be entered on the dependant worksheet?

Who is @Cameron ? :wink: Does he still stop by here?

Unless the client has deductible child care expenses is there any need to have the child set up in the dependant worksheet? Probably there is and I’m just too tired already… :slightly_smiling_face:

3 Likes

I was wondering that myself :thinking:

Yes there are other reasons - CCB, CAI, GST credit (CRA will calculate 50% for shared custody), medical… and maybe others?? You’re right about being too tired. This is why I rely on Taxcycle to make sure I haven’t missed anything. The rules are far too complicated and specific for me to remember all the nuisances. The DTC transfer from dependant is so finicky whereby the sun and the moon have to align just right. My client’s son has an approved T2201 so I want to make sure I’m not missing anything. Looks like he can’t benefit at all from it.

2 Likes

We’ve had success with CRA reviews for years by drafting agreements that state parent 1 pays x amount, parent 2 pays x amount in child support, and for sake of ease parent 1 pays x amount so that even though they are paying child support, they can still claim dtc and eligible dependant.

For instance, (fake names etc etc):

Ally pays $400 a month child support to Eric
Eric pays $2000 a month child support to Ally
For sake of ease, Eric pays Ally $1600 a month for child support.

We also note who claims which child, which credits, alternating years, income amount fluctuations, etc. Very rare we have one denied, and then we can usually get it through on the second round. Has really helped our single Dads who routinely get the eligible dependant and DTC review.

Both parents sign off, no references to section 7, 3 etc guidelines and CRA happily eats their words each time they review Eric when I send them the signed parenting agreement.

Really, really important to have your clients send you their separation/divorce agreements BEFORE anyone signs off so you can review to make sure the wording never references the section guidelines and the terminology doesn’t make either parent lose out on credits they should be able to claim.

Thank you for coming to my Tedtalk - the girl who fights with CRA via reviews all day every day

And because of the above, this is why we like that TaxCycle doesn’t make it so the form is locked off when there’s child support being paid :upside_down_face:

4 Likes

Thank you so much for the guidance! This is why I love this forum!

2 Likes

Wow! This is excellent. The separation and custody agreement need to be worded just right and you have both mom and dad as clients. This is a commonly reviewed line item so all ducks need to be in a row. Thank you for sharing!

Even when both parents aren’t clients, if they are amicable and they will sign off on it all, it works so well!

Hi @AlbertaEFileT

I have a follow up question to your work around. In the guide for line 31800 it specifically says that a parent who pays child support cannot claim the disability amount for that child:
If you pay child support: You cannot claim the disability amount transferred from a child for whom you had to pay child support. However, special rules may apply if you were separated from your spouse or common-law partner for only part of 2022 due to a breakdown in your relationship.”

Line 31800 – Disability amount transferred from a dependant - Canada.ca

How are you working around this one even if both parents are required pay child support? I understand the work around for Amount of Eligible Dependant line 30400 but I don’t see if for the DTC. Do you have a specify ITA reference?

Thanks for your guidance.

Nothing special that has ever needed doing as the dtc transfer has never been reviewed, just the eligible dependant portion. The only time I’ve had the DTC transfer reviewed is adult dependants. Generally DTC for kiddo is only issued to one parent, so they would be the one to claim it. Hard to say how it would go in a review situation for that as you’re right, it does have slightly different language on the child support and DTC vs the eligible dependant.

I wish I had a better answer or an example for you where I fought it and won but haven’t had this particular situation yet for the DTC transfer

No at problem. Thanks for your reply. At least it offers some hope for the Eligible dependant.

In their CRA account online, in the benefits & credit section, click the DTC part and see if their kiddo is listed there. If not, then it would be the other parent claiming the DTC I would think. If they are amicable there could be an agreement worked out between them to give your client the cash value of the credit but that’s the best I can come up with for a solution.

1 Like