Tax Checklist After Divorce in Canada

Your tax situation changes the moment your divorce is legally effective — not the date of separation, not the date the judge signed the order, but the day the Certificate of Divorce is issued (Day 32 after 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 Certificate of Divorce is issued on March 15, 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: You file as "divorced" for the entire tax year if your divorce was finalized before December 31. If it was finalized after January 1, you file based on your status on December 31 of that year.

Spousal support payments: If you pay spousal support under a written agreement or court order, the payments are deductible from your income. If you receive spousal support, you must report it as income. Child support payments (post-May 1997 orders) are neither deductible nor taxable.

Legal fees: Legal fees paid to collect support arrears are generally deductible. Legal fees to negotiate or establish support may also be partially deductible. Fees for property division or custody matters are not deductible.

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: Transfers between spouses on marriage breakdown qualify for the principal residence exemption — no capital gains tax
• 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.

The protection: transfers made under a court order or written separation agreement for property equalization purposes are generally considered transfers at fair market value, but 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 →