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Spousal Support Series: Part 5 – Determining Income for Spousal Support

It is not uncommon for a spouse’s income for the purposes of spousal support to be different than the income reported on that spouse’s income tax return.

This can happen for a lot of different reasons. Sometimes it’s because someone is not reporting income on their tax return; because they are being paid in cash, or they are receiving regular financial support from their parents or other family member, or they are receiving non-taxable benefits from their employer such as the personal use of a company car.

The most common reason that someone’s taxable income (as listed on their tax return) doesn’t match their income for spousal support purposes is when the person is self-employed. This is because the Income Tax Act allows self-employed individuals to deduct from their taxable income many expenses that have a personal component. This could include the use of a car, mortgage deductions for the use of home office space, travel costs, meals and entertainment, etc. These are all items that the Income Tax Act legitimately permits self-employed individuals to deduct from their income when filing their tax returns. However for spousal support, many of these deductible expenses are added back to the individual’s income.

Unless someone is a T-4 employee, income tax returns and notices of assessment are just a starting point for calculating income for spousal support. Often, a deeper analysis is required to ensure the proper number is arrived at.

Sometimes, the deeper analysis requires the assistance of a financial expert, referred to as a chartered business valuator. This type of expert has specialized expertise in analyzing various financial documents and relevant data to pinpoint income for support purposes.

A family lawyer can assist in determining what analysis (if any) is required to determine proper income for spousal support purposes and whether or not a financial expert should be retained.

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