Divorce Tax Guide Alberta: Complete 2026 Guide
Understanding the Canadian tax implications of divorce, separation, and property division.
Disclaimer:
This guide provides general information only. Consult a tax professional for advice specific to your situation.
1. Taxation of Support Payments
Spousal Support
Periodic spousal support payments have significant tax implications:
For the Payer
Periodic payments are tax-deductible, reducing taxable income. This can provide significant tax savings, especially for higher-income earners.
For the Recipient
Periodic payments are taxable income and must be reported. The recipient should plan for tax liability when budgeting.
Lump-sum payments are treated differently - generally not taxable to the recipient nor deductible by the payer.
Child Support
Since May 1, 1997, child support is tax-neutral:
- Not taxable income for the recipient
- Not tax-deductible for the payer
- This applies to all orders made after April 30, 1997
2. Property Transfers
Property transfers between spouses during marriage breakdown generally occur on a tax-deferred rollover basis under the Income Tax Act.
How the Rollover Works
- The transfer is deemed to occur at the transferor's tax cost (adjusted cost base)
- No capital gain or loss is realized at the time of transfer
- The receiving spouse inherits the original tax cost
- Capital gains tax is deferred until the property is eventually sold
Example
If an investment property was purchased for $200,000 and is now worth $400,000, transferring it to the other spouse triggers no immediate tax. When that spouse later sells for $450,000, they'll have a capital gain of $250,000 ($450,000 - $200,000 original cost).
3. RRSP and Pension Division
RRSP Transfers
RRSPs can be divided tax-free if done correctly:
- Must be done pursuant to a written separation agreement or court order
- Transfer must be directly between registered plans
- No immediate tax consequences
- Receiving spouse pays tax when they eventually withdraw
Warning:
Withdrawing RRSP funds to give to your spouse (rather than transferring) triggers immediate taxation and potential withholding tax. Always transfer directly between plans.
Pension Division
Alberta allows division of pension benefits earned during marriage. Options include:
- Transfer to locked-in retirement account (LIRA): Tax-deferred transfer
- Pension splitting at retirement: Each spouse taxed on their portion
- Offset with other assets: Consider tax implications of alternative assets
4. The Matrimonial Home
The family home often receives special tax treatment:
Principal Residence Exemption
- Gains on sale of principal residence are generally tax-free
- Only one property per family can be the principal residence in any year
- After separation, each spouse can have their own principal residence
Planning Considerations
- If selling immediately, the exemption protects the gain
- If transferring to one spouse, that spouse gets the exemption going forward
- Consider designating the home as principal residence for maximum tax benefit
5. Filing Status Changes
Your separation affects how you file taxes:
| Status | When to Use |
|---|---|
| Married | Still together or separated less than 90 days at year-end |
| Separated | Living apart for 90+ days due to breakdown of relationship |
| Divorced | Divorce is final |
Key Changes After Separation
- GST/HST credit recalculated based on individual income
- Canada Child Benefit adjusted
- Cannot transfer unused credits to former spouse
- Must report new address to CRA
6. Frequently Asked Questions
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