Married? Common-Law? It’s complicated? Find out what happens to your taxes.
February 27, 2017
Relationships can be confusing enough, so making sure you give the Canada Revenue Agency (CRA) the right status update can help you avoid tax issues down the road. Here’s a quick rundown of what you should know if you’re married or living common-law, and how it affects your taxes.
I got married. Do I need to tell the CRA?
So you put a ring on it, congrats! A change in your marital status can affect the benefits and credits that you can claim on a tax return. Keeping the CRA up-to-date will help you avoid a hefty tax bill. You can download an RC65 Form (marital status change) from the CRA website to keep them in the know.
Does being married or common-law change my tax bill?
Claiming as married doesn’t typically increase your taxes. In fact, couples might be able to pool receipts like charitable donations and medical expenses to max out their tax savings. Marital status is determined on December 31 of the tax year, so as long as you were married on or before then, you’ll be considered married for that tax year.
What’s the difference between being married and living common-law?
The rules are slightly different for common-law couples. Married couples can claim their status as soon as they’ve made it official through a civil or religious ceremony, regardless of whether or not they’ve been living together. Other couples must be living together for 12 months in a row to be considered common-law for tax purposes. If you have children together, then you’re considered common-law as soon as you begin living together.
I separated from my common-law partner. How does this affect my taxes?
You and you’re common-law partner need to be apart for at least 90 days to be considered officially separated by the CRA. In the year of separation, a claim for the common-law partner amount is calculated using your partner’s net income before the date of separation, rather than the whole year.
I was married, but I’m separating from my spouse. What happens to my taxes?
When it comes to taxes, once you get married, you won’t file as single again. If you separate or divorce your spouse during the year, you need to be apart for 90 consecutive days, then you’d claim your status as “separated” or “divorced”. Just like in a common-law separation, a claim for the spouse amount is calculated using their net income before the date of separation, rather than the whole year.
How do I update my relationship status with the CRA?
You can keep the CRA in the loop by downloading and mailing the RC65 Form Marital Status Change form.
Are my tax credits or benefits linked to my partner’s income?
If you’re married or living common-law, there are a few credits and deductions that get calculated based on your total household income and children in your home, if you happen to have some. The Canada Child Benefit (CCB) and the GST/HST quarterly payment are two examples of credits that are calculated based on joint income. If you’re receiving these benefits and your marital status changes, you need to update the CRA by the end of the month following your marital status change. The catch here is if you’re going through a separation, then you’ll need to wait the 90-day waiting period. If you keep getting benefits based on an incorrect status, you’ll be asked to pay it back. There’s no negotiating these amounts, and they can add up quick.
Can I choose what kind of status to claim?
If you’re into a life of crime, by all means! If you prefer to stay on the right side of the law, make sure you claim your status accurately. The rules are specific when it comes to your status, and CRA may consider a couple common-law even if other organizations or government bodies do not.
Can my partner and I file one return?
You lovebirds might share everything, but you both still need to file taxes separately. Couples can’t file a joint return in Canada, they’ll always file individually so one partner won’t be held responsible for the other’s tax debt. The good news is that your spouse’s refund can be used to offset the others tax bill, and vice versa.
Whether you’re single, common-law or married, it’s good to know how your relationship will affect your taxes. Keep the CRA up to date to make sure you’re accessing all of the credits and benefits you’re eligible for.