Love is love. And taxes are taxes. In Canada, same-sex couples, whether married or common-law, have the same tax benefits as straight couples. Whether you and your partner are non-binary, cisgender, or anywhere on the LGBTQ spectrum, you deserve to feel seen, celebrated, and empowered with tax knowledge to help make the most out of your tax returns.
NOTE: While LGBTQIA+ stands for Lesbian, Gay, Bisexual, Transgender, Queer or Questioning, Intersex, and Asexual, the “+” indicates there are many other identities that aren’t included in this acronym, such as 2S (Two-Spirit), Pansexual, etc. These are all valid identities under the spectrum of gender fluidity and sexual identities.
How does being a same-sex couple affect our tax situation?
No matter your gender or how you self-identify, being part of a couple won’t change how you file your personal taxes—unless you are common-law or married.
To be considered common-law by the CRA, you and your significant other must have consistently lived under the same roof for more than a year OR have a child together (related to you by blood or adoption) OR share primary custody of a child under 18.
As common-law partners, you’ll be taxed the same way married couples are.
If you’ve been living together for less than a year and there are no children in the picture, all you have to do is identify yourself as ‘single’ on your tax return and file away.
What are the benefits of filing together vs separately?
In Canada, every individual must file their own tax return. There’s no such thing as a joint return for couples. This said, preparing your returns at the same time is the best way to ensure you tap into the tax advantages of being married or in a common law relationship.
Here are 4 conjugal tax breaks to consider:
1. Transferring unused credits. If you file as married or common law and have some unused tax credits, these can be transferred to your partner to reduce their taxable income. Transferable credits include age amount, tuition amount, disability amount, and pension income amount.
In 2021, Canadians can earn up to $13,808 without paying any federal taxes. This non-refundable tax credit is called the Basic personal amount (BPA) and TurboTax will automatically include it for you.
For example: Mia works full time and earns $35,000 per year. Mia’s partner Selena, didn’t work in 2021, so her reported income is $0. As Selena doesn’t need her basic personal amount to save on taxes, she can transfer it to Mia. Mia will save an additional $2,071 in taxes from this transfer alone, which would be lost if Selena claimed the credit for herself.
2. Combining credits and expenses. You and your partner can now pool certain expenses and have one of you claim the total. Pooled credits include medical expenses for yourself, your partner, children under the age of 24, and other dependents such as parents or grandparents.
3. Starting a Spousal RRSP. A Spousal Registered Retirement Savings Plan works like a personal RRSP as it’s a way to reduce income tax after retirement. The only difference is that you can contribute to it, but it remains in your partner’s name and under their control
TIP: With the federal government’s Home Buyers’ Plan, you can use up to $35,000 of your RRSP savings ($70,000 for a couple) to help finance your down payment on a home. To qualify, the RRSP funds you’re using must be on deposit for at least 90 days.
4. Applying for a joint mortgage. Ready to nest in a home you can call your own? Applying for a mortgage together is the way to go. Not only will your combined income raise the odds of getting a mortgage, it can help you secure a larger loan, at a lower interest rate, to finance your purchase.
If your down payment is higher than 20%, you can even avoid the expense of mortgage insurance. All of which increases your buying power and brings you closer to affording the home of your dreams — together.
What tax breaks could be helpful for LGBTQ couples who want to start a family?
If you and your significant other are considering — or in the process — of adopting a child, the tax implications are probably the furthest thing from your mind. All the same, you can claim eligible adoption expenses on your taxable income to a maximum of $16,729.
Canada child benefit (CCB)
Starting or raising a family? The CCB is here for you. This tax-free month payment was developed with lower income families in mind, so if your household income is too high, you may not qualify. Use the child and family benefits calculator to see what you’re entitled to.
Conception-related medical expenses
Although surrogacy bills and expenses aren’t deductible in Canada, most fertility treatments and drugs are considered deductible medical expenses. This includes IUI (intrauterine insemination) and IVF (in vitro insemination), the two main fertility treatment options for LGBTQ families.
No single article can capture the diverse experiences of the LGBT community. If there’s anything we’ve missed or if you have a question we didn’t answer, please reach out on social media @TurboTaxCanada and our experts will help answer your questions.
GET THE TAX BREAKS YOU DESERVE
Filing as a couple, especially if it’s your first time, can be confusing nonetheless.
That’s why TurboTax offers coupled returns. Our tax software prompts you to enter information about you and your partner while crunching the numbers in real time to make the most of every credit and deduction - on both your returns!