Unlike in other countries such as the United States, Canadian tax rules do not allow spouses to file joint income tax returns. However, there are ways that couples can reduce the total amount of taxes they end up having to pay.
Separate Tax Returns for Spouses
Spouses in Canada cannot file a single joint income tax return.
Each spouse must file a separate return. Your tax preparation software may include an option to prepare a ‘coupled’ return. By using this method, the software maximizes the benefits for the couple as a whole while still generating two separate returns.
The spouse with the higher income should maximize deductions to reduce paying taxes at a higher rate.
However, the Canada Revenue Agency does not always allow deductions to be passed on to the spouse. For example, if you or your spouse spends money on child care, it may be possible to deduct some of those expenses from your income when filing your federal income tax return, but, with certain exceptions, the person with the lower income must claim the child care expenses. Learn more here. with TurboTax Live we have live tax experts in your corner making sure that you get all the credits and deductions you deserve.
Pooling Charitable Donations and Medical Expenses
You and your spouse can pool your donations and medical expenses and claim them on one of the tax returns to reduce the overall amount you pay on your income taxes. If you and your spouse donate more than $200 per year to registered charities, you can get a larger tax credit by pooling your donations. One partner claims all of the donations on his or her return.
Because the federal government offers a non-refundable tax credit for expenses that are above a percentage of one partner’s net income, the total taxes are generally lower if the spouse with the lower income can claim all of the couple’s medical expenses.
Learn more about charitable donations here.
Need a better understanding of Medical Expenses? Click here.
Transferring Tax Credits and Amounts to Your Spouse
Transfers are another way to lower the tax payable overall for a couple.
For example, if your spouse attended university and doesn’t require the entire tuition credit to lower his or her tax payable, you may be able to claim part of this expense on your own return. Other potential transfers include the disability amount, the pension income amount, and the age amount.
Learn more here from the CRA.
Deduction for an Elected Split Pension Amount
If you (the pensioner) and your spouse (the pension transferee) have jointly elected to split your eligible pension income by completing Form T1032 (Joint Election to Split Pension Income), you can benefit from this by paying less tax overall.
More information on Split pension here.
Contributing to Your Spouse’s Registered Retirement Savings Plan
Contributions you make to your spouse’s RRSP can be deducted from your taxable income.
This is advantageous if you have a higher net income, which is taxed at a higher rate than your spouse. However, the contributions you make to a spouse’s RRSP reduce your own deduction limit. The total amount you can deduct for contributions you make to your RRSP or that of your spouse cannot be more than your own deduction limit. If you cannot contribute to your RRSP because of your age, you can still contribute to your spouse’s or common-law partner’s RRSP until the end of the year when your spouse or partner turns 71.
For more on RRSP, please click here.