Congratulations on your upcoming wedding!
Even though you’re planning the happiest day of your life, that planning is probably causing you some serious STRESS! Not only are you likely running around finding the perfect dress, best venue, and most delicious cake, your probably also worried about how to pay for it all.
All of those little “must-haves” can sure add up fast; in fact, the according to a study by Wedding Bells magazine, Canadian couples spend approximately $30,717 on a wedding (including the honeymoon).
Since this is one of the more significant expenses that couples face, we felt there would be a benefit to provide newlyweds with some tips to help save money for the beg day, and to help afterwards at tax time.
Not sure how taxes tie into weddings? Read on, and you will…
Set A Budget
Schedule some time with your partner to sit down and establish your initial budget for your special day. Grab your notebook and make sure to cover these questions:
- Who is paying for the wedding?
- Will your parents be contributing to the budget?
- Ask if your family members would like to cover a partial expense like the flowers, music, honeymoon…etc as a wedding present
- Calculate how much the two of you can save between now and the big day
- Create a spreadsheet and include notes to remind you through the planning process
- Ensure that your budget contains an amount that you are going to meet and an amount that you absolutely cannot pass – try to hit the first budget but if something pops up, like getting married in the Art Gallery of Ontario, and that has always been a dream, then ensure you have the financial know how to know whether that is a yes, no or maybe.
Essentials vs Nice-to-Haves
Now that you have your budget, it’s time to define what are your must haves versus nice-to-haves. Make sure to include your partner in this step to make sure this day is special for the both of you. Some key areas to consider include:
- Start by making your wish list. Are you going to have a ton of flowers or a simple candle arrangement?
- Now set your expectations! Give a percentage of importance to each item. You might decide you can do without the white doves.
- Make sure to get three price comparisons. This gives you grounds for a stronger negotiation.
- Go over the list and start the elimination process there must be three things you can do without.
- Remember there are no wrong answers. It’s your wedding but make sure to stay within the budget.
Saving for Your Special Day
We’re sure by now you realize the wedding will come at a large expense and you will need to start saving right away! You can easily open up a joint account and automate 20% of your salary to your wedding fund. This will help you develop a healthy habit of saving together and put money away for your next adventure or project.
*TIP: try limiting your spending on small stuff. Ex. Instead of driving to work, ride a bike instead. Also try making a coffee at home as well as cooking dinner a meal. You should also consider placing your money in a TFSA investment account to increase your return.
Staying on Budget
You have already established your budget, but sticking to it requires some discipline and organization skills. Have you started doubting yourself? We’ve got a few tricks here to help get you get through the next few months:
- Track your spending: Put your wedding essentials into a worksheet to track the amounts due, due dates and who you owe it to
- Save 10% for unseen costs
- Make sure your wedding budget is in a separate account so you can track and stick to the budget
- Work overtime costs into your budget
- Factor in tips and gratuities
- Don’t forget little things like RSVP cards
- Update your budget on a daily basis
10 Wedding Tips to Consider
- Pick your top three priorities and focus on them
- Set up an e-invite
- Don’t get married on a Saturday as it’s the most expensive day to book halls, vendors, etc.
- Find a venue that doesn’t require you to use their vendors
- Don’t serve a sit-down dinner, buffets are less expensive
- Skip professional decorators and ask family members to pitch in and decorate the venue
- Slash your guest list; do you really need to invite your mom’s second cousin, twice removed who lives very far away?
- Pass on details that aren’t important to you! Will anyone really notice?
- Opt to not have an open bar
- Have a friend be your DJ – have them create an awesome playlist!
Tax Savings to Consider
You can always donate your wedding dress and decorations to a charitable organization after the wedding. You can also enjoy the benefit of a tax deduction on your first tax return that you file as a married couple. In fact, there are several tax credits and deductions you could take advantage of as a new couple.
Many couples feel the need to go all out on their special day but it is only one day. Mastering your wedding budget will set you up with some extra peace of mind. You will be glad not to have to deal with the debt from the celebration and have some money saved for a well-deserved honeymoon.
Let the CRA, and if you’re in Quebec, Revenu Quebec know that you’ve tied the knot. As a married couple, you are entitled to several tax benefits such as the ability to transfer items to the lower income spouse in order to save some taxes, as well as being able to contribute to a spousal RRSP. One thing that does not change is the fact that you each still need to file your own tax returns, but you have to include information related to your partner on your return.
If, however, one or both of you were receiving certain credits like the GST/HST credit, you might not be eligible to receive this credit any more once your marital status changes to married because that credit is calculated based on the “adjusted family net income”. Other benefits for which eligibility is based on the “adjusted net family income” includes the Working Family Income Tax Benefit and the Canada Child Benefit.
Other benefits include, if you have supported your spouse during the year and their net income was less than $11,635, you are able to claim an amount for them, which lowers your taxes owing. As well, if you don’t need certain credits such as the tuition amount or the disability amount to reduce your taxes, you can transfer it to them to lower their tax payable.
You can also pool your donations and medical expenses, and claim them on one return to maximize your refund.
If you are both supporting your children, the lower-income partner must claim the child care expenses, regardless of who actually pays them.
Do not forget that under the Income Tax Act, your marital status changes to common-law when you’ve been living with your significant other for just 12 months.
Failure to notify the CRA (or RQ) of a change in marital status can be a bad idea if you are receiving credits or benefits which you are not entitled to. You will have to re-pay those with penalties and interest.
Whether you or your partner owns or has previously owned a home can impact your eligibility for the CRA’s Home Buyer’s Plan.
Another program that marriage impacts is the LifeLong Learning Plan (LLP) allows you to withdraw amounts from your registered retirement savings plans (RRSPs) to finance training or education for you or your spouse or common-law partner (so they can go back to school). You do not have to include the withdrawn amounts in your income, and the RRSP issuer will not withhold tax on these amounts. Your repayment period is generally 10 years, you have to repay to your RRSP both the amounts you withdrew under the LLP.
Any amount that you do not repay when due will be included in your income for the year it was due.
All of this might seem complicated, but don’t worry because TurboTax takes into account all of these rules, and deductions and makes sure that when you become “married” and file your returns, that you are both claiming the maximum refunds allowable, or reducing your taxes owing by the maximum amount.
Don’t worry! When it comes to marriage… TurboTax has you covered. We’re your Best Man, Maid of Honour, Ring Bearer and we’ll still make our speech without embarrassing anyone!