In Ontario and across Canada, you must inform the Canada Revenue Agency (CRA) of your separation the month after you have been living apart for 90 consecutive days. You do this using Form RC65 or your CRA My Account. Your tax status changes from “Married” to “Separated,” which can significantly impact your Canada Child Benefit (CCB) and GST/HST credits.
Going through a relationship breakdown in Ontario brings a tidal wave of emotional and financial changes. Amidst the stress of untangling your lives, it is easy to forget about the government. However, properly filing your taxes the year you separate is critical. Failing to update the Canada Revenue Agency (CRA) can lead to massive demands for repayment if you receive benefits you are no longer entitled to, or you could miss out on thousands of dollars in much-needed support.
Whether you live in Toronto, Ottawa, Mississauga, or Thunder Bay, the tax rules following a separation are governed by federal tax law, not just provincial guidelines. 📋 The CRA has very specific definitions of what constitutes a “separation” for tax purposes. Unlike family law, where you are considered separated the day you decide the relationship is over, the CRA requires a mandatory 90-day waiting period. This guide will walk you through exactly how to handle your taxes during this transitional year.
Step-by-Step Process for Filing Taxes After Separation in Ontario
Managing your taxes after a separation requires timing and specific documentation. It is highly recommended to consult with a qualified accountant or a local Ontario family lawyer from our directory to ensure you are meeting all your obligations and maximizing your eligible deductions, such as claiming legal fees related to spousal support.
Step 1: Wait the Mandatory 90-Day Period
The CRA does not want to process paperwork for couples who simply have a temporary fight. ⌛ For tax purposes, you are not considered legally separated until you have lived separate and apart for a continuous period of 90 days due to a breakdown in the relationship. If you reconcile on day 89, the clock resets. During this 90-day window, you do not notify the CRA. You simply wait.
Step 2: Notify the CRA of Your Marital Status Change
Once the 90 days have passed, you must officially notify the CRA of your new marital status. The status is retroactive to the exact date you separated. You can do this quickly online through the CRA “My Account” portal, by calling the CRA directly, or by mailing a completed Form RC65: Marital Status Change. Do not wait until tax season in April to do this, especially if you have children.
Step 3: Recalculate Your Benefits (CCB and GST/HST)
When you update your status to “Separated,” the CRA immediately stops using your combined household income. 💵 Instead, they will recalculate your Canada Child Benefit (CCB) and GST/HST credits based strictly on your individual income. For many single parents in Ontario, this results in a substantial increase in monthly benefit payments, which helps cover the sudden costs of maintaining a single-income household.
Step 4: File Your Individual Annual Tax Return
When tax season arrives (usually April 30 of the following year), you will file your return as a separated individual. You will no longer link your spouse’s SIN or income to your return. However, if you paid or received spousal support during the year pursuant to a written separation agreement or court order from the Superior Court of Justice, you must report these amounts. Generally, spousal support paid is tax-deductible for the payor, and taxable income for the recipient.
How Much Does it Cost to File Taxes After Separation?
Filing taxes correctly during a divorce year often requires professional help due to new complexities like support payments and legal fee deductions. Budgeting for these CAD expenses is wise:
- CRA Notification: Updating your status via Form RC65 is 100% free.
- Personal Accountant / Tax Preparer: Hiring a professional to file your individual return typically costs between $150 and $450 in Ontario.
- Family Law Firm Fees: Drafting a formal separation agreement (required to make spousal support tax-deductible) generally ranges from $2,000 to $4,500+.
How Long Does the Process Take?
The timeline revolves around the CRA’s mandatory waiting periods. ⏱ You must wait 90 days after physically separating before you can inform the government. Once you submit Form RC65 online, the CRA usually updates your profile and recalculates your benefits within 4 to 8 weeks. Mailed paper forms can take up to 12 weeks to process.
Frequently Asked Questions (FAQ)
Can we still file jointly in Ontario if we separated this year?
No. In Canada, you never file a “joint tax return” the way they do in other countries. You always file individual returns, but you link them if married. Once you are separated for 90 days, you must file entirely as an individual, regardless of when in the year you split.
Can I deduct the lawyer fees I paid for my divorce?
You cannot deduct legal fees paid to get a divorce or to divide property (equalization). However, you generally CAN deduct legal fees paid to establish, increase, or collect spousal support or child support. Ask your law firm for an itemized invoice.
Who claims the “Eligible Dependant” credit for our child?
If you share parenting time equally, only one parent can claim the “Amount for an Eligible Dependant” (equivalent to spouse credit) for a specific child per tax year. You and your ex must decide who claims it, or alternate years. If you have two children, you can each claim one.
What happens if I forget to tell the CRA we separated?
If you continue to collect benefits based on a single, lower income without reporting your true marital status, the CRA will eventually audit you. You will be forced to repay all overpaid child benefits and GST credits, often with substantial interest and penalties.
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