SHARED CHILD CUSTODY

Canada Child Benefit:

When custody is shared between separated parents, where each parent has custody between 40% and 60% of the time, each parent is entitled to 50% of the Canada Child Benefit they would otherwise receive with full custody.^[1]

If one parent has custody for more than 60% of the time, only that parent is eligible for the CCB and they will receive 100% of the benefit.

When custody changes to a new arrangement, both parents must inform the CRA either through My Account or by submitting Form RC66 (Canada Child Benefits Application).

UFile step for client with shared custody:
For each child, go to MaxBack Controls, then under “Child included for purposes of the CCB calculation?” select “The child is in shared custody.” UFile will calculate the correct benefit, but the CRA may suspend benefits or pay incorrect amounts if not properly notified of the shared custody arrangement.

Eligible Dependant Credit:

Parents who share custody generally do not claim the eligible dependant credit (Line 30400), since they usually claim the spousal amount instead—and both cannot be claimed at the same time.

Normally, the eligible dependant credit requires a child to be wholly dependent on the claimant. In shared custody, no parent meets this condition.

However, for shared custody parents, one parent is permitted to claim the credit. The parents must agree on who can claim it, and if they don’t agree, then neither can claim it. If there are two children under shared custody, each parent can claim the credit for one child.

In UFile, for a single, separated or divorced parent, Ufile will by default claim the dependant credit. If a parent is not claiming the credit, then a special step is needed in UFile: For the child, under Controls, go to the question, Claim this dependant as the eligible dependant on federal line 30400? and select Do not claim.

A parent who is paying child support is not permitted to claim the credit in respect of that child.^[2] However, if each parent is paying child support to the other for a child, one of the parents can claim the credit.^[3] 

Child Care Expenses Deduction when one parent reimburses the other:

Sometimes one parent (the first parent) pays the child care provider directly, and the other parent (the second parent) reimburses part of the cost. In this situation:

• The child care provider should issue a receipt to the first parent for the full amount paid.
• The first parent should issue a receipt to the second parent for the reimbursement amount.

Tax treatment:

• The first parent is generally considered to have paid child care expenses equal to the full payment to the provider, minus the reimbursement received.
• The second parent is generally considered to have paid child care expenses equal to the reimbursement made to the first parent.

Exception – when the reimbursement is a support payment:

• If the reimbursement is a support payment (i.e., deductible for the second parent and taxable for the first parent), then it is not treated as a child care expense.
• In this case:

• The reimbursement does not reduce the first parent’s claim for child care expenses.
• The second parent cannot claim the reimbursement as a child care expense.

Medical Expenses Credit:

For a child in shared custody, each parent may only claim medical expenses they personally paid.

Transfer of Disability Tax Credit:

Two parents sharing custody can split the unused portion of the child’s disability tax credit. An agreement to split may be included in a custody agreement. The total of the claims cannot be more than the maximum amount for that child.

However, if a parent is claiming the eligible dependant credit (line 30400) for the child, only that parent can claim the unused portion of the credit.

In UFile, for the child, go to the infirmity/disability section. There is a section, Dependant's unused disability amount. In this section you can declare how much of the unused portion to claim, by either amount or percentage.

GST/HST Credit and Trillium benefits:

For shared custody, the GST/HST credit and Ontario Trillium Benefits related to a child are divided between the parents, similar to the Canada Child Benefit. However the division won’t be reflected in UFile’s calculation sheets, which will overestimate the credit and benefits.

References:

• Income Tax Act, s122.6, definition of shared-custody parent
• T4114 Canada Child Benefit and related federal, provincial, and territorial programs
• Schedule 5 - Amounts for Spouse or Common-Law Partner and Dependants
• Income Tax Folio S1-F3-C1, Child Care Expense Deduction
• Transfer of disability tax credit
• Sprong v. Queen (2019) Tax Court