Spousal Support Across the Border: Why the Same Payment Can Be Deductible in Canada and Tax-Free in the US

Canada and the United States take opposite positions on spousal support. Canada taxes it to the recipient and lets the payer deduct it. The US, for agreements executed after 2018, does neither: the payer gets no deduction and the recipient reports nothing. When the payer and recipient live on different sides of the border, Article XVIII(6) of the treaty decides the outcome, and it produces a mismatch that favours one direction of payment and penalizes the other.

Key takeaways

• Canada: periodic spousal support under a written agreement or court order is deductible to the payer and taxable to the recipient. Child support is neither.
• US: for divorce or separation agreements executed after December 31, 2018, alimony is not deductible and not includible. Pre-2019 agreements keep the old deductible-and-taxable treatment unless modified to adopt the new rule.
• Treaty Article XVIII(6): support paid across the border is taxable only in the recipient's country, except that any amount the payer's country would exclude from a resident recipient's income is exempt in the recipient's country too.
• Canadian payer to US recipient: Canada allows the deduction; the US recipient reports nothing. Both sides benefit.
• US payer to Canadian recipient: the US payer gets no deduction; the Canadian recipient is exempt under paragraph (b). Neither side is taxed, but the payer loses the deduction.

How the treaty rule works

Article XVIII(6)(a) gives the recipient's country the exclusive right to tax cross-border support. Paragraph (b) then carves out any amount that the payer's country would have excluded had the recipient been resident there.

Canadian resident pays a US resident. Canada taxes support to resident recipients, so paragraph (b) carves out nothing; paragraph (a) makes the support taxable only in the US. Under the US post-2018 rule, the recipient excludes it. Canada still allows the payer's deduction because Canadian law does not condition the deduction on the recipient's tax treatment. Result: deduction in Canada, no inclusion in the US.

US resident pays a Canadian resident. The US would exclude the support from a US resident recipient's income (post-2018 agreement), so paragraph (b) exempts it in Canada. The US payer has no deduction. Result: no deduction anywhere, no inclusion anywhere. The payer bears the full after-tax cost.

For pre-2019 US agreements, the US still treats alimony as deductible and taxable, so a US payer to a Canadian recipient gets the deduction and the Canadian recipient is taxable in Canada under paragraph (a).

Child support

Child support is not deductible or taxable in either country, and Article XVIII(6) applies the same way: taxable only in the recipient's country, where it is excluded anyway.

Withholding

Canada's Part XIII withholding does not apply to support payments made to a non-resident; the payer deducts the amount on the T1 (line 22000) and reports the recipient's name and address. The US has no withholding on alimony paid to a non-resident because, post-2018, it is not US-source income.

Lump sums and retroactive payments

Canada requires payments to be periodic to be deductible; a lump-sum settlement generally is not, unless it represents arrears of periodic amounts. The US post-2018 rule makes the distinction moot for new agreements. Cross-border settlements should be structured with the Canadian periodic requirement in mind if the payer is Canadian.

Worked example

A Toronto executive divorced in 2024 pays $60,000 a year in spousal support to a former spouse who moved to Florida.

• Canada. The payer deducts $60,000 on the T1, saving roughly $32,000 at a 53.5% marginal rate.
• US. The Florida recipient reports nothing; Article XVIII(6)(a) makes the amount taxable only in the US, and US law excludes it.
• Net. The payment costs the payer about $28,000 after tax; the recipient receives $60,000 tax-free.

Reverse it: a Miami executive pays $60,000 a year to a former spouse in Toronto under a 2024 agreement. No US deduction; Article XVIII(6)(b) exempts the amount in Canada. The payment costs the payer the full $60,000.

Official sources

"Alimony and other similar amounts (including child support payments) arising in a Contracting State and paid to a resident of the other Contracting State shall be taxable as follows: (a) such amounts shall be taxable only in that other State; (b) notwithstanding the provisions of subparagraph (a), the amount that would be excluded from taxable income in the first-mentioned State if the recipient were a resident thereof shall be exempt from taxation in that other State." — Canada-United States Tax Convention, Article XVIII(6), https://www.canada.ca/en/department-finance/programs/tax-policy/tax-treaties/country/united-states-america-convention-consolidated-1980-1983-1984-1995-1997.html

"The payer spouse can't deduct alimony or separate maintenance payments made under a divorce or separation agreement (1) executed after 2018, or (2) executed before 2019 but later modified if the modification expressly states the repeal of the deduction for alimony payments applies to the modification. Alimony and separate maintenance payments the recipient spouse receives under such an agreement are not included in their gross income." — Internal Revenue Service, Topic No. 452, Alimony and Separate Maintenance, https://www.irs.gov/taxtopics/tc452

"Enter on line 21999 of your tax return the total amount of support payments you paid under a court orders or written agreements. Enter on line 22000 of your tax return the deductible part of the support payments that you paid." — Canada Revenue Agency, Support payments made, https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/about-your-tax-return/tax-return/completing-a-tax-return/deductions-credits-expenses/lines-21999-22000-support-payments-made.html

Practitioner note

The direction of the payment decides the tax result, and it should be on the table when the settlement is negotiated. A Canadian payer's deduction is worth roughly half the payment at Ontario's top rate; a US payer has no equivalent. Where the parties have flexibility on which assets and payments make up the settlement, the after-tax numbers differ by tens of thousands of dollars a year.

See also: Planning a move? See the Canada-to-Florida guide and browse every corridor by city, province, and state.

Next step

Fairlight prepares cross-border support payment analysis, the Canadian return with the deduction, and the US return with the treaty position. See cross-border pricing or book a call.