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. Being married, or having a common-law partner, impacts your tax rate and may render you eligible to receive additional tax benefits.

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. In 2018, for example, if you earn under $45,282 in taxable income, your tax rate would be 15 percent. If you earned from $45,283 to $90,563, your tax rate goes up to 20.5 percent.

If you earned over $90,563, but under $140,388, your rate would be 26 percent. And, if you earned over $140,388 but under $200,000 your tax rate would be 29 percent. Finally, taxable income over $200,000 is taxed at a rate of 33%.

When you have a spouse or common-law partner and combine income and expenses, your taxable income and tax rate could increase or decrease.

Spousal Transfers

A significant tax benefit of marriage is spousal transfers. If your spouse or common-law partner does not need all of her non-refundable credits, she 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 tuition and education expenses..

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 $11,327, as of 2015.

The amount you receive for the spousal amount is the difference between your spouse’s income and $11,327.

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.

You and your spouse’s public transit expenses also may be added into one pool and claimed by either of you on your tax return.

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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