If you got married or began a common-law relationship last year, chances are you’ve already made some big adjustments to your life. From splitting the household chores to realizing your hubby is a closeted Real Housewives fan, you’ve learned how to tackle things as a couple. Filing taxes together for the first time may also be a new experience for you.
Here are some tips on what to expect:
1. For Better or Worse
Once your marital status changes, your tax situation changes as well.
How much it changes depends on a variety of factors including available credits and income levels of each spouse. If neither of you has a dependant and have similar income levels, you likely won’t see much of a change. If one spouse has a significantly lower income or loads of credits to claim, you may be in for a pleasant surprise
2. Transferable Credits
If you file as married (or common-law), you are entitled to transfer a number of credits to your spouse, as long as you don’t need them first.
You can transfer the unused portion to your own return at line 326 if your spouse doesn’t use the full amount of any of these credits:
- Age amount
- Tuition amount
- Disability amount
- Pension income amount
For example, if you are a post-secondary student with a fairly low income, you may not use all of your tuition credits this year. If you have leftover credits, you can choose to either bank them or transfer them to your spouse. Depending on your situation, this could mean that your spouse could receive up to $5000 worth of credits to lower his or her tax bill.
3. Combining Credits
As a couple, you may now pool certain expenses and have one spouse claim the total.
Pooled credits include:
- Medical expenses for yourself, your spouse, and your (or your spouse’s or common-law partner’s) children born in 1998 or later – line 330
- Medical expenses for other dependants you support such as your parents or grandparents – line 331
- Charitable donations – line 349
If you each have charitable donations for example, you can choose to have your spouse claim the combined amount of both of your donations. Because donations totaling over $200 give a bigger deduction, combining these credits can lead to significant savings.
4. Pension Splitting
If one spouse has eligible pension income and is the higher earner, splitting the pension income may lead to a lower bottom line overall for you as a couple. Although no money actually changes hands, designating a portion of pension income to a lower earning spouse could put the higher earning spouse into a lower tax bracket. This can equal a good sized tax break for the couple overall.
5. Joint Return vs. Coupled Return
In Canada, regardless of your marital status, tax returns are filed individually.
A common misconception for newlyweds is that being married means filing only one “joint” tax return. Each spouse must submit his or her own return to the CRA.
“Coupled” returns are different. A coupled return means that while each spouse will eventually file an individual return, the returns are prepared together. If you have any of the above credits to split or combine, a coupled return is the way to go.
Whether you’ve just tied the knot or about to celebrate your diamond anniversary, TurboTax has you covered. TurboTax Standard, Self-Employed, and Premier products all feature optimizers for pension splitting, donations, and medical expenses so you and your spouse can easily and automatically maximize all of your credits and deductions at tax time. Or, if you’re using TurboTax Free, use the search tool to find and claim all the credits available to you.