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Canada Child Benefit and Eligible Dependent Credit following Separation or Divorce

Canada Child Benefit ("CCB")

The CCB is a non-taxable monthly payment provided by the Government of Canada to help eligible families with the cost of raising children under the age of 18.

It is a common misconception that, following a divorce or separation, both parties cannot apply for the CCB, or that one party must apply and share the benefit with the other party. 

Following a separation or divorce, eligibility for the CCB will depend on the parenting arrangement. In a primary care arrangement, only the primary caregiver is eligible to apply for the CCB. However, in a shared parenting arrangement, both parties are eligible to apply for the CCB as both parties are considered primarily responsible for the child's care.

In applying for the CCB, the Canada Revenue Agency must be informed of the shared parenting arrangement. If either party is eligible to receive the CCB (which will depend on his or her income), he or she will receive half of the total CCB that he or she would have received if the child lived with him or her full time.

Eligible Dependent Credit ("EDC") for a Child of the Marriage

Unlike the CCB, eligibility for the EDC can be far more confusing.

First, in order to be eligible to claim the EDC, a claimant cannot be living with, or supporting, a spouse or common law partner, and he or she cannot be support by a spouse or common-law partner.

Second, a claimant cannot also claim a spouse or common-law partner tax credit for that same year. If a claimant is eligible for both the EDC and credits relating to support of a spouse, it is important to have discussions with an accountant to determine which credit is more valuable to the claimant.

Third, only one party in a household may claim the EDC. This is the case even if the other party in the household is eligible to make the claim for a different child. For example, if two adult siblings reside in the same home, and each have a child of their own, only one party can claim the EDC for his or her child, the other party cannot make the claim for the other child.

Fourth, only one party may claim the EDC for a particular child in any given year. This is the case even with a shared parenting arrangement. For example, if two separated individuals share the parenting of their one child, only one party can claim the EDC for a given year, it cannot be shared between the parties. However, they may agree to alternate the years in which each party may claim the EDC. If there is more than one child of the marriage, the parties may agree that they can each claim one child.

Fifth, a party who is required to make child support payments for the child in question is prohibited from claiming the EDC. If both parties are required to make child support payments to each other (as in a shared parenting arrangement where both parties earn an income), either party may be eligible to claim the EDC, if the parties can agree which party will make the claim, and for which child.

Claiming the EDC can get tricky in a shared parenting arrangement where one party is paying a set-off amount of child support to the other party. In other words, where the higher income earner pays the difference in child support to the lower income earner, this may prohibit him or her from applying for the EDC. This is because the CRA views this situation as a disqualification under the fifth scenario set out above. If parties wish to avoid this issue, a divorce or separation contract should be drafted to clearly establish that both parties are required to pay each other child support.

It is important to note that there may be additional factors that apply with regards to eligibility to claim the EDC. This is particularly so if any of the children have mental or physical disabilities, or if there is a dependent adult in the household. It is always a good idea to discuss these matters with a lawyer and an accountant familiar with this area to determine the best approach to claiming taxable benefits.

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