How Marriage and Common-Law Unions Change Your Tax Status in Canada

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Dennis Hammer is a writer and finance nerd with six years of investing experience. He writes about personal finance for Wealthsimple. Dennis also manages his own investment portfolio and has funded several businesses in the past. Dennis holds a Bachelor's degree from the University of Connecticut.

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.” 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 CCTB 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 income is less than $15,000 (2023 number), the other person will get a tax credit called the spouse or common-law partner amount

  • 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 buyer’s plan and home buyer’s 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 Accountby 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.

Frequently asked questions

Marital status has less effect on taxes in Canada than in some other countries. Married couples don’t file a joint return and also don’t list combined income specifically on their individual tax return.

Because of this, married couples and those in common-law partnerships don’t pay different tax rates specifically because they’re married. However, depending on you and your partner's income, you may be able to use some tax credits that they’re eligible for but that their tax liability doesn’t support.

If you’re legally in a common-law partnership, it’s considered tax fraud to file as single without claiming your accurate common-law status. Common-law couples in Canada are not allowed to file a joint return; instead, they each file single returns and mark that they’re in a partnership. If you fail to list your common-law status, there may be penalties relating to benefits you receive that you would not have qualified for if you listed your common-law partnership.

Married couples in Canada are not allowed to file a joint tax return as in other countries. Every Canadian files an individual income tax return regardless of their marital or common-law status. When you’re married, you still file your own tax return and mark that you’re now married or in a common-law partnership.

While marital status doesn’t affect tax rates, it does offer potentially significant benefits for tax purposes. The most important is the ability to file a Schedule 2 and claim all or part of certain amounts that your spouse or common-law partner qualifies for, if they do not need to use them. Essentially, you can share some of your nonrefundable tax credits with your partner to reduce their overall tax liability.

You may also be able to split pension income with a partner to reduce your overall tax liability. Splitting an eligible pension with your partner allows you to each pay a lower tax rate by reducing your individual incomes. Not all pensions qualify for pension splitting, with the OAS and CPP specifically excluded.

Whether married, in a common-law partnership, or separated, the filing process in Canada is the same. You file an individual tax return and identify your marital status.

You should mark “separated” if you’ve been living apart from your spouse or common-law-partner for at least 90 days because of a breakdown in the relationship. There are no specific penalties for filing as separated, but you do lose certain benefits, such as the ability to share nonrefundable tax credits under Schedule 2.

There are no direct tax benefits lost from getting married, but your new combined income may disqualify you from some benefits programs you were previously entitled to. If your spouse makes significantly more than you, it can affect your eligibility for things such as the GST/HST credit, CCB, and CWB based on family income.

In order to be considered as being in a common-law relationship, you have to live together for at least 12 months in a conjugal relationship. Alternatively, if you live with someone who is the parent of your child by birth or adoption, you are automatically considered to be in a common-law partnership with them. It’s important to remember that you may be required to prove that you’ve been living in a common-law relationship, whereas while legally married the marriage certificate acts as proof.

Married couples in Canada are taxed at the same rates as unmarried people. There are some potential benefits that come from being married or living as common-law partners that could lower your overall tax liability, but the rates for your income are the same.

You may get a bigger tax refund when married or filing as a common-law couple than if single. Your tax rates are unchanged, but you may be able to deduct some of your spouse's unused tax credits from your potential tax liability.

Last Updated November 11, 2023

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