Getting married or living as a common-law couple doesn’t just mean having a partner-in-crime with whom to share the details of your day or divide up the less enjoyable household chores — it could mean big changes to how you file your federal taxes.
Filing your federal taxes as a couple could potentially save you money — if you do it the right way.
While it’s always best to consult a tax professional or use a well-known tax software when preparing your taxes as a couple, here are a few things you might want to keep in mind.
Getting started with your married tax return
The Canadian Revenue Agency considers you married for tax purposes as long as you’re married before the last day of the tax year for which you’re filing. However, if you’ve been living with your partner for 12 months before getting married you might already be considered common-law partners.
Technically, the CRA wants you to change your status within a month of getting married (even if you aren’t yet preparing your taxes). You can do this online through your My CRA account.
Once the CRA learns of your change in status, some of your benefits may change. For example, the CRA will automatically move children in a male-female partnership over to the woman’s account and assign the Canada Child Benefits to her.
Changes in deductions when you file jointly
It’s not just the benefits that will change when you file your taxes as a married couple, but you might find yourself eligible to transfer your spouse’s deductions or you may qualify for tax credits to lower the amount of taxes you pay.
For example, if you supported your spouse during the year and their net income was less than $11,474, then you may be eligible. This information would be entered into Line 303 on your tax return.
When you file joint taxes, you are also eligible to transfer certain nonrefundable credits such as the pension income amount, the age amount, disability and education expenses.
If your spouse is able to deduct more than they owe you can use their credits to reduce your tax liability.
You can also pool certain expenses as a couple, such as medical expenses or charitable donations. Because the tax credit for medical expenses is based on your total income, if the spouse with the lower income claims medical expenses on their tax return, you could get a higher return. If you want to pool charitable donations, one spouse would end up claiming all the charitable donations on their return to get a larger tax credit.
For added deductions, you can purchase spousal RRSPs. These can help you balance your income if one partner made significantly more than the other during the tax year.
If one couple has a higher income and is making larger contributions to their individual RRSP, at retirement they’ll have a higher income and pay more tax than if that amount was divided between two people — putting each individual in a lower tax bracket.
With a spousal RRSP, your spouse or common law partner is designated as the beneficiary of your RRSP and the money would be transferred into an individual RRSP in your spouse’s name should you die before them.
Consult with a professional to maximize your tax return
It’s helpful to contact a professional to guide you through your first time filing a joint tax return. They can point out all the ways you can save money by making the most of the benefits extended to married taxpayers.