If you are married or in a common-law partnership, the Canada Revenue Agency (CRA) requires you to report your relationship status and information about your partner on your tax return. As a couple, you don’t file your taxes together. However, you can harmonize the information on your tax return to help decrease your taxes or increase your refund.
If you are married by the last day of the tax year for which you are filing, the CRA will consider you as married for the entire year. However, because the CRA recognizes common-law couples, you may have to file your taxes as a couple even before your wedding day if you already live together.
For tax purposes, the CRA considers anyone who has lived together for at least 12 continuous months to be common-law partners. If you haven’t lived together that long, you are still considered part of a common-law relationship if you have a child together, or if one of you supports and lives with the other’s child.
Filing Taxes as a Couple
In the information section of your return, the CRA prompts you to note your marital status. It also requests the name of your spouse or partner, social insurance number, net income, and information about benefits received and repaid. The CRA requires this information because your marital status can affect common income-based benefits.
Notifying the CRA of Your Marriage
You shouldn’t wait until when your tax return is due to notify the CRA of your marriage. The agency requires you to report your marriage by the end of the month following the month of your wedding. This allows the CRA to recalculate your benefits as soon as possible.
You can change your status online using the Change My Marital Status feature on the CRA’s My Account online service. Alternatively, you can fill out Form RC65 and mail it to the CRA.
Marital Effect on Benefits
Marriage may cause a change to benefits payment such as the Working Income Tax Benefit. Income-tested benefits especially such as the Canada Child Benefit will likely be affected. The potential effect varies so once you’ve updated your marital status, it’s a good idea to contact CRA to find out if you’ll need to take any additional steps to avoid a delay in payments.
Optimizing Income Tax Returns for Couples
Your marital status doesn’t just affect the benefits you receive. As a married couple, you also have the right to transfer certain deductions or credits between the two of you.
For example, if you have medical expenses, you can maximize the effect of the Medical Expense Tax Credit by adding your expenses together and claiming them on a single return. The CRA allows you to claim a credit for the amount of medical expenses that exceeds the lesser of $2,302 or 3 percent of your income. If you split up your expenses and claim them separately, it can be harder to reach the threshold and maximize your credit.
Additionally, if either you or your spouse qualify for the age, pension income, disability or education amounts, you can transfer these amounts between each other. Claimed on lines 301, 314, 318 and 323 respectively, these non-refundable tax credits offset tax you owe, but cannot result in a refund.
If one of you claims credits but doesn’t owe enough tax, their value is virtually wasted. However, if a credit is transferred to the spouse who owes the most tax, you can maximize your benefit.
If you receive pension income, you can split the income (on paper) and lower your family’s overall tax bill.
Filing a Coupled Return
To optimize your benefits and decrease your tax owed, you and your new spouse need to coordinate your income tax returns. Luckily, there is income tax software that can streamline and perfect that process.
With coupled returns from TurboTax, the software prompts you to enter financial details for yourself and your spouse. Then, the software automatically identifies the most advantageous filing strategy. It assigns credits, benefits and expenses where they make the most sense, and as a result, you owe less tax or receive a larger refund.
If your marriage ends, you are also required to notify the CRA. Use the same notification process you used when you got married, and make sure to notify the agency by the last day of the month following your split. If you are just taking a break or separating, don’t notify the agency unless it lasts longer than 90 days.