What LGBTQ+ Couples Need to Know About Taxes

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 2024, Canadians can earn up to $15,000 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 2023, so her reported income is $0. The BPA is not transferred, however since Selena earns less than the BPA, you can claim the Spouse Amount. The Spouse Amount is equal to you BPA less than the spouses net income. So, since Selena’s net income is $0, Mia can claim the same amount as her BPA as the spouse amount. 

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, and children under the age of 18 on line 33099. Then you can also claim amounts that you or your spouse paid for other dependents on line 33199. Other dependents are children over 18, grandchildren, parents, grand-parents, brothers, sisters, aunts, nephews, or nieces – as long as they’re residents of Canada. 

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?

Adoption-related expenses 

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 $17, 131. 

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. 

Additionally, certain expenses paid in respect of a surrogate mother or donor (for example, a donor of sperm, ova, or embryos) may be eligible as of 2022. Read more here. 

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.