The CRA Punishes Two-Household Families

I originally wrote this piece in 2018 and have advocated for change ever since.

When I wrote this, I was a part-time single mom and a self-employed Chartered Professional Accountant. For years, I’d worked in the Collaborative Practice as a financial neutral, supporting families as they navigated separation and divorce, and much of that time went to helping recently separated clients navigate the Canadian tax system. What I found was an unfair, unnecessary burden placed specifically on two-household families, one that has nothing to do with fairness and everything to do with which words a lawyer happened to use in their separation agreement.

Here’s the specific mechanism, and it applies specifically to families with two or more children in a shared parenting arrangement: single parents can claim the eligible dependant credit for one child, worth roughly $3,100 (in British Columbia, it varies by province) today, but only if they don’t have a legal obligation to pay child support. Canadian and provincial family law require every parent who parents less than 60 percent of the time to contribute financial support based on their income. When two parents in a shared arrangement earn different amounts, the higher earner typically owes the lower earner more. Lawyers often simplify this in the separation agreement by netting the two obligations into a single “offset” or “set-off” payment, partly because most family lawyers aren’t fluent in the fine print of Canadian tax law, and partly because it’s simpler for families. Coordinating two separate payments between parents takes trust- trust that the higher earner will actually pay, when a lower-income parent often can’t front their own share and hope it comes back.

That single wording choice determines everything. If the agreement uses offset language, the CRA treats the higher-earning parent as the only one with a legal child support obligation, and denies them the credit outright. If the agreement instead states that each parent pays the other separately, both parents qualify. Two families in the exact same financial and parenting arrangement can end up with completely different tax outcomes, purely because of how one lawyer phrased a clause differently than another.

My own family’s agreement used offset language. My co-parent and I have shared parenting since separating in 2013, and I was, and still am, the lower-earning spouse. When I filed my first post-separation return, I went through a one-time review to prove our separation and shared parenting. After that, I had no trouble at all getting the eligible dependant credit reflected on my own taxes, along with exactly half my Canada Child Benefit entitlement, correctly reflecting our shared arrangement.

My former spouse, the higher-earning parent, had a much harder time. The CRA automatically defaults a child’s tax record to the mother every time, and doesn’t cross-reference between spouses’ files. Even after I told them directly that we shared custody and proved it on my end, the CRA still required him to separately prove the children were his, a step that was both time-consuming and hard to navigate. Most families never get told this step exists, which likely means a lot of separated families are losing out on half their Canada Child Benefit without ever knowing why.

Then came the actual Eligible Dependent Credit fight. The CRA denied it for the 2015 tax year because of our agreement’s offset language. I responded to the review on his behalf, was denied again, then filed a formal notice of objection, and eventually won, after roughly ten hours of my own professional time. The following year, he was denied again, and the entire cycle restarted: a new review response, a new objection, another copy of our full separation agreement, over a hundred pages, sent to the CRA. That agreement has now been sent to them seven separate times. I don’t know where those seven copies went, or why they aren’t simply kept on file.

If it takes ten hours of dedicated professional expertise to win back roughly $3,100 for one family, an average family without that expertise can’t sustain the fight. Only families with real resources can pursue it, and those tend to be exactly the families who need the credit least. The families who need it most are the ones most likely to give up.

In 2022, I took the issue directly to the Minister of Finance’s office, and they forwarded it to a manager within the CRA’s Appeals Branch. She called me and later confirmed by email that she understood the problem precisely: that under a set-off agreement, only the lower-earning parent gets approved for the credit, while an agreement stating the same two amounts separately gets both parents approved, even though the actual legal child support obligation is identical either way. She asked for the full paper trail from our 2015 and 2016 fights, notices of reassessment, objections, and correspondence, and told me the CRA was actively working on it.

She also confirmed something I’d suspected but never had proof of: in 2016, my co-parent’s credit was approved only after I sent a letter informing the CRA that he had no legal obligation to provide child support to me. This wasn’t true. It turned out I hadn’t actually convinced the CRA that he lacked the sole obligation. What I’d really done was tell them I wasn’t holding him to it. I’d negated our child support agreement in writing, on my children’s behalf, something I wasn’t actually allowed to do. The CRA accepted it anyway, while acknowledging, separately and in writing, that the underlying issue remained unresolved for every other family in the same position.

I believed her when she said this would get fixed. When I followed up later, she had moved departments, and the issue seemed to have moved with her, forgotten rather than resolved.

None of this is about hardship in the dramatic sense. It’s about a family that made shared parenting work, splitting time and responsibility fairly, only to have the tax system quietly punish the specific wording a lawyer chose years ago, wording neither parent had any reason to think mattered at the time. And it’s a system that, even when someone inside it agrees the problem is real, still lets it disappear the moment the right person moves to a different desk.

Two-household families already navigate enough. The tax system shouldn’t be another hurdle they have to fight through, especially over a technicality nobody warned them about in the first place, and especially once the government’s own officials have confirmed, in writing, that the technicality is unjust.