Does Being Married Affect Your Tax Rate in Canada?

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.  The individual federal tax rates for 2019 are:

  • The first $47,630 of taxable income is taxed at 15 percent.
  • The next $47,629 is taxed at 20.5 percent (the portion of taxable income between $45,282 and $95,259).
  • The next $452,408 is taxed at 26 percent (the portion of taxable income between $90,563 and $147,667).
  • The next $62,704 is taxed at 29 percent (the portion of taxable income between $140,388 and $210,371).
  • Income over $210,371 is taxed at 33 percent.

Spousal Transfers

A significant tax benefit of marriage is spousal transfers. 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.

These include the age amount, the pension income amount, the disability amount and unused tuition credits.  If your pension is eligible, you may be able to split your pension with your spouse and lower your taxes owing.

As an example, say 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.

Because she only needs $2,000 worth of these credits to reduce her tax liability to $0, you could use the other $2,000 to reduce your tax liability.

Spousal Amount and Other Non-refundable Credits

Some taxpayers benefit from the spousal amount. This is a non-refundable credit you can claim if you supported your spouse at any time during the year and his net income was less than $12,069 as of 2019.

The amount you receive for the spousal amount is the difference between your spouse’s income and $12,069.

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 jointly, 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.

Tax Benefits and Children

Married couples and common law-partners with children may receive additional benefits. “Kids qualify for child tax benefits, (many) based on income levels,” Juneja says.

The Canada Child Benefit is a tax-free, monthly payment for families to help them with the cost of raising children under the age of 18.

You must file a tax return to receive these benefits,” Juneja explains. 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.

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