Tax Checklist After Divorce in Canada

Your tax situation changes when your divorce becomes legally effective — not the date of separation, not the date the judge signed the order, and not necessarily the day the Certificate of Divorce is issued. The legal effective date follows the 31-day appeal period; Form 70T is the proof available for the next-step updates from Day 32 following the Divorce Judgment. Here's what CRA needs from you and what changes in your tax filings.

1. Notify CRA of Your Marital Status Change

Deadline: By the end of the month following the month your divorce became effective. If your divorce became legally effective in March, you must notify CRA by April 30.

How:

• CRA My Account ("Change my marital status" tool)
• MyCRA mobile app
• Mail Form RC65 (Marital Status Change)

What happens next: CRA recalculates your benefit entitlements based on your individual net income rather than combined family income. For most newly divorced people, this means increased payments.

2. Canada Child Benefit (CCB) Recalculation

After you report your marital status change, CRA automatically recalculates the CCB. Key changes:

If you have primary residence of the children: Your CCB is now calculated on your income alone. If your income is lower than the combined household income was, your monthly payment increases — often significantly.

If you share parenting time equally (40%+ each): Each parent receives 50% of the CCB amount calculated on their individual income. Both parents must notify CRA and confirm the shared arrangement.

Action required: If you're now the primary caregiver but weren't the previous CCB recipient, you must apply as the new primary caregiver. CRA doesn't automatically transfer the benefit to the other parent.

3. GST/HST Credit Recalculation

The quarterly GST/HST credit is also income-tested at the family level. After divorce, your entitlement is recalculated based on:

• Your individual net income (not combined)
• Your marital status as of December 31 of the tax year
• The number of eligible children in your care

If your individual income is below the phase-out threshold, you may now qualify for the full credit — or a larger amount than you received as part of a higher-income household.

4. First Tax Return After Divorce

Your first post-divorce tax return has several unique requirements:

Filing status: Your marital status on December 31 determines the status used on that year's return. If your divorce was legally effective by December 31, report yourself as divorced for that return.

Spousal support payments: Tax treatment depends on the applicable rules and the date and terms of the written agreement or court order; confirm the treatment with CRA or a tax professional before claiming a deduction or reporting income. Child support payments are generally neither deductible nor taxable.

Legal fees: The tax treatment of legal fees depends on what the fees were incurred to do. Confirm any deduction with CRA or a tax professional before claiming it.

RRSP transfers: If RRSP assets were transferred to your ex-spouse's RRSP under the separation agreement using Form T2220, this is not a taxable event — you don't report it as income or a withdrawal.

5. Property Transfer Tax Implications

The equalization payment under provincial family law (such as PEI's Family Law Act) is completely tax-free to the recipient and non-deductible for the payor. This applies regardless of the amount.

However, transfers of specific assets can trigger tax consequences:

• Principal residence: Tax treatment depends on the transfer structure and the applicable Income Tax Act rules; confirm it before reporting the transfer.
• Non-principal real estate: May trigger capital gains unless rolled over at adjusted cost base under the Income Tax Act
• Business assets or shares: May trigger capital gains or other tax events depending on the structure

6. Update Your Tax Withholding

If your employer uses your marital status for payroll tax calculations (TD1 form), submit an updated TD1 reflecting your new status and dependant claims. This prevents over- or under-withholding throughout the year.

7. Section 160 Liability Awareness

Under Section 160 of the Income Tax Act, if your ex-spouse has outstanding tax debt and you receive assets from them for less than fair market value during the marriage or separation, CRA can hold you jointly liable for their tax debt up to the value of what you received.

Do not assume that a court order or written separation agreement alone removes Section 160 exposure; the structure matters. If your agreement involves asset transfers, confirm with a CPA that Section 160 exposure is addressed.

The Prince Edward Island After-Divorce Checklist includes a complete tax section with CRA notification deadlines, benefit recalculation timelines, and coordination with your other post-divorce financial tasks.

See more Prince Edward Island guides →