Marriage changes your finances in many ways, including the way you file your annual tax return, it doesn’t change your actual tax rate. However, being married, or having a common-law partner, may render you eligible to receive additional tax benefits and spousal transfers.
Rajiv Juneja, CGA in Edmonton, says that marriage allows for benefits such as “the spousal amount and transfers from one spouse to another.” These benefits “may result in a higher return,” he says.
Here’s how being married affects your tax rate in Canada:
Taxable Income and Tax Rate
Your tax rate is calculated from your taxable income. The tax rates themselves do not change by being married or common-law, the amount of federal tax you pay though can be affected by the shared benefits.
A significant tax benefit of marriage is spousal transfers which you can find in schedule 2. If your spouse or common-law partner does not need all of their non-refundable credits, they can transfer them to you to reduce your tax liability. Only certain non-refundable credits are eligible for spousal transfer; age amount, Canada caregiver amount for infirmed children under 18, pension income amount, disability amount, and the tuition amount.
If your pension is eligible, you may be able to split your pension with your spouse and lower your taxes owing.
If your spouse is permitted to deduct $4,000 worth of these credits from her tax amount, but she only has $2,000 worth of tax owed. She will only need $2,000 worth of these credits to reduce her tax liability to $0, you can use the other $2,000 to reduce your tax liability.
Spousal Amount and Other Non-refundable Credits
Some taxpayers benefit from the spousal/common-law partner amount. This is a non-refundable credit you can claim if you supported your spouse or common-law partner at any time during the year. The maximum amount in which you can claim changes every year and is reduced by your partner’s income.
Other non-refundable credits may be added together and claimed on your return, or on your spouse’s return. “A spouse’s medical expenses and charitable contributions can be claimed,” Juneja says. By filing together, you can pool your charitable contributions and medical expenses together in order to receive a larger tax credit.
If you or your spouse purchased a home during the tax year, you may qualify for the homebuyer’s amount of $5,000. To apply for this credit, neither you nor your spouse may have lived in a home that you owned for four years prior to the purchase of your new home, according to the CRA. You can split the credit between you and your spouse as long as the total claimed amount for both doesn’t exceed $5,000.
Tax Benefits and Children
The Canada Child Benefit is a tax-free, monthly payment for families and single parents to help them with the cost of raising children under the age of 18. The payment amount depends on family income. So single parents might receive more or less than married couples depending on the joint income for all custodian parents.
You must file a tax return every year to receive these benefits. For single parents, the parent with custody has to file a tax return every year. You also must live with and be the child’s primary caregiver. Additionally, one spouse must be a Canadian citizen, permanent resident, protected person, or temporary resident.
References & Resources