Alimony and Spousal Support: Cross-Border Tax Treatment Between Canada and the US

The US and Canada treat alimony and spousal support differently, and the difference got wider after the 2017 US tax reform. Under agreements executed after December 31, 2018, the US no longer allows a deduction for alimony paid, and the recipient no longer includes it in income. Canada kept the old system: the payer deducts, the recipient includes. When one person lives in Canada and the other in the US, both countries’ rules apply to the same payments, and the mismatch creates planning questions that did not exist before 2019.

How does the US treat alimony after 2018?

The Tax Cuts and Jobs Act (TCJA) repealed the alimony deduction for agreements executed after December 31, 2018. Under the old rules (agreements executed before 2019), the payer deducted alimony as an above-the-line adjustment, and the recipient included it as ordinary income. The TCJA flipped this: for post-2018 agreements, the payer gets no deduction, and the recipient has no income inclusion.

The repeal applies based on the date of the divorce or separation agreement, not the date of the payment. A pre-2019 agreement that is modified after 2018 keeps the old rules unless the modification expressly adopts the post-2018 treatment. The One Big Beautiful Bill Act (2025) made the TCJA provisions permanent, so this is not expiring.

Child support was never deductible or includable under US law, and that did not change.

How does Canada treat spousal support?

Canada’s rules have not changed. Spousal support (called “support amounts” in the ITA) is deductible by the payer under ITA 60(b) and includable in the recipient’s income under ITA 56(1)(b), provided the payments meet the statutory requirements: they must be periodic (not a lump sum), payable under a court order or written agreement, paid for the maintenance of the recipient, and the parties must be living apart at the time of payment.

Lump-sum payments are not deductible unless they are structured as a series of periodic payments with a defined schedule. Child support is carved out separately under ITA 56.1(4) and is neither deductible by the payer nor includable by the recipient, matching the US treatment.

The key difference: Canada still operates the deduction-inclusion model that the US used before 2019, so the payer’s marginal rate and the recipient’s marginal rate both matter to the after-tax cost of the support.

What if the payer is in the US and recipient in Canada?

This is the scenario where the post-2018 mismatch creates the clearest asymmetry.

On the US side: The US payer gets no deduction for alimony paid under a post-2018 agreement. The payments leave the payer’s pocket with no tax relief. If the payer is a US citizen or resident, the income used to make the payments is fully taxed.

On the Canadian side: The Canadian recipient includes the support in income under ITA 56(1)(b). Canada taxes the payment as ordinary income at the recipient’s marginal rate. There is no mechanism in Canadian law that says “because the payer got no deduction, the recipient should not include it.”

The result is economic double taxation of the same dollar: the payer is taxed on the income used to make the payment (US), and the recipient is taxed on the payment received (Canada). This is different from the pre-2019 world, where the deduction-inclusion pairing ensured that only one person was taxed on the support.

The treaty does not fix this. Article XXI (Exempt Organizations) does not address alimony, and the general rules of Article XXIV (Elimination of Double Taxation) address the same income being taxed by both countries, not different income being taxed by each country on different taxpayers. The Saving Clause (Article XXIX(2)) preserves each country’s right to tax its own residents and citizens.

What if the payer is in Canada and recipient in the US?

This direction is more favorable under the current rules.

On the Canadian side: The Canadian payer deducts the support under ITA 60(b). The deduction reduces the payer’s Canadian taxable income.

On the US side: The US recipient does not include the alimony in US income if the agreement is post-2018, because IRC 71 is repealed. The recipient receives the money tax-free for US purposes.

However, if the US recipient is a Canadian tax resident (which would be unusual if they live in the US), or if Canada asserts a right to tax the payment under Part XIII withholding, the analysis changes. In practice, spousal support paid to a non-resident of Canada is not subject to Part XIII withholding; ITA 212(1) does not list support amounts as a category of payment subject to non-resident withholding.

The net effect: the Canadian payer gets a deduction, and the US recipient has no US income inclusion. One tax benefit, no tax cost. This is the reverse of the other direction and is actually better for the parties combined than the pre-2019 system, where the US recipient would have included the amount.

Does the foreign tax credit apply to support payments?

It generally doesn’t, because the two taxes apply to different taxpayers. The FTC relieves double taxation where the same person is taxed by both countries on the same income. When the payer is taxed in one country and the recipient is taxed in the other, neither can claim an FTC for the other’s tax.

The one exception arises for dual filers (US citizens living in Canada, or green card holders). A US citizen living in Canada who receives spousal support includes it in Canadian income (ITA 56(1)(b)) and is also subject to worldwide taxation by the US. Under a post-2018 agreement, the US does not include the alimony, so there is no US tax on it and no need for an FTC. Under a pre-2019 agreement, the US would include it, and the Canadian tax paid on the same income would be creditable on Form 1116.

Does the treaty override the US repeal?

No. The treaty does not contain a specific provision on alimony or spousal support. Article XVIII covers pensions and annuities, and alimony is neither. Article XXII (Other Income) covers items not dealt with elsewhere, but the Saving Clause preserves each country’s domestic treatment for its own residents and citizens.

A treaty cannot require the US to grant a deduction that its domestic law has repealed. The treaty can (and does) prevent the same income from being taxed by both countries to the same person, but it does not address the mismatch where different countries tax different people on what amounts to the same economic flow.

What about pre-2019 agreements?

Pre-2019 agreements are grandfathered under the old US rules: the payer deducts, the recipient includes. This makes cross-border support under these agreements simpler, because both countries use the same deduction-inclusion model (deductible for payer, includable for recipient). The FTC works as expected for dual filers.

A pre-2019 agreement that is modified after 2018 keeps the old rules unless the modification expressly provides that the post-2018 rules apply. This is a deliberate opt-in, not an automatic switch. If both parties benefit from the old rules (the payer from the deduction, the recipient from a lower bracket), there is no reason to adopt the new treatment in the modification.

What about child support?

Child support is neither deductible nor includable in either country, regardless of when the agreement was executed. The cross-border direction of the payment does not change this. There is no mismatch issue with child support.

The distinction matters because the ITA and the IRC both define “child support amount” separately from “support amount,” and the classification determines the tax treatment. If a payment qualifies as child support under the law of either country, it falls outside the deduction-inclusion system in both.

What should I do next?

If you are paying or receiving spousal support across the Canada-US border, the first question is when the agreement was executed (pre or post 2019), because the answer determines which US rules apply. The second question is which direction the money flows, because the tax asymmetry runs one way. Run the combined after-tax cost on both sides before negotiating the amount, because a dollar of support costs different amounts depending on the cross-border direction and the agreement date.

• Filing jointly with a non-resident Canadian spouse (section 6013(g)), which is relevant when the divorce hasn’t happened yet and a joint election is in place
• Income splitting: Canada vs US cross-border, the broader context of moving income between spouses
• Canada vs US tax rates comparison, the marginal rates that determine the after-tax cost of support
• Form 1116 and how Canadian tax changes affect the US credit, the FTC mechanics for dual filers receiving support

This guide is general information, not tax advice for your specific situation. Which points apply, and how, depends on your facts.