Did you get married or enter a common-law arrangement with your partner? Congratulations! While you may be riding the incredible high of finally having taken a significant step with your better half and just want to spend time discussing furniture arrangements, future holiday destinations, and retirement strategies, there are some changes that are less fun but equally important to talk about: taxes.
When you get married, or start living together under a common-law arrangement, it can impact your tax situation. Some of the changes occur immediately (e.g., your eligibility for the GST/HST credit) and other changes impact you when you file your tax return. One thing that doesn’t change, however, is that you are both still required to file your own tax returns.
While it’s obvious that your marital status changes when you get married, many people are surprised to find out that for tax purposes, they’re already living common-law. Under the Income Tax Act, your marital status changes to common-law when you’ve been living with your significant other for 12 months or more. Other situations that classify as a common-law arrangement include living with the person you share a child with, either as a birth parent or under a custodial agreement.
What happens when your marital status changes
Here are some things to be aware of when your relationship status changes:
Your entitlement to the GST/HST credit changes since it is based on “adjusted family net income.” If your partner earns income, your adjusted family net income usually increases when you become married or common-law, so you might find that you no longer receive the GST/HST credit. If you are still eligible for the credit, only one of you will receive it, even if you were both receiving it before.
Your entitlement to the CCB and CWB changes, respectively, since these are also based on your adjusted family net income
When you’re completing your tax return, you’ll need to provide information about your spouse or common-law partner, including his or her net income, for certain credits to calculate properly
If you or your partner’s net income (line 23600) is less than $15,705 (2024 number), the other person will get a tax credit called the spouse or common-law partner amount. Be aware that the other spouse’s net income must be less than the claiming spouses basic personal amount. If the claiming spouse’s income is greater than $173,205, this amount can go as low as $14,156 for 2024 (see Federal Worksheet). If your spouse is impaired, this amount is increased. The claiming spouse must also be supporting the transferring spouse.
You can split or share certain credits. For example, if you both have medical expenses, one of you can claim them all to increase your refund. Wealthsimple Tax will automatically optimize your returns to take advantage of this.
Whether your partner owns or has previously owned a home can impact your eligibility for the home buyers’ plan and home buyers’ amount
You can withdraw funds under the Lifelong Learning Plan from your Registered Retirement Savings Plan (RRSP) for your partner to go back to school
If you are both supporting your children, the lower-income partner usually claims child care expenses. However, there are some conditions in which the higher-income party claims expenses.
The higher-income person can contribute to a spousal RRSP, effectively splitting income if you and your partner are in different tax brackets
It’s important to let the Canada Revenue Agency know when your marital status changes. You can do this through My Account, by phone, or by filing form RC65. You must also accurately report your marital status when filing your tax return — even if you don’t really feel like you’re living common-law.
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