In Canada, tax returns are always filed separately, which means that you and your partner will continue to file individual tax returns. However, if you’re using tax software, you'll have the option of “coupling” the preparation of both returns.
Filing the two individual returns together can help optimize tax returns by identifying ways in which taxes can be reduced and can help maximize the benefits for each couple.
While the process of filing your return doesn’t result in any significant changes, whether you’re married or living common-law, here’s what you need to know about filing your taxes with a partner.
If you are newly married or in a common-law relationship, you must notify the Canada Revenue Agency of your status change. If you’re a resident of Québec, you must also notify Revenu Québec.
You're expected to communicate this change by the end of the following month after your status has changed, either through the CRA website, by phone, or by mail. For example, if you got married in June 2022, you're expected to notify the CRA and/or Revenu Québec no later than July 31, 2022.
Tax benefits for couples
It’s important to remember that when you get married or enter into a common-law relationship, the benefit amounts you’re used to receiving may change as they are calculated based on total household income. It could also mean that you become eligible for several credits or benefits you previously weren’t qualified for.
If you file as a couple, you're entitled to transfer certain credits to your partner, as long as you don’t need them first. These include:
- Tuition amount
- Disability amount
- Age amount
- Pension income amount
Any amounts transferred from your partner should be calculated on Schedule 2 and entered on line 32600.
As a couple, you're allowed to combine some of your expenses so one spouse can claim the total tax credit.
Pooled credits include:
- Medical expenses for you, your spouse, and your children. While medical expenses can get you a tax credit, there is a certain threshold you have to hit – 3% of your net income or $2,421, whichever is lower. To qualify for the tax credit, your expenses have to surpass this amount, so combining any medical expense claims as a couple can help you get a bigger medical expense tax credit.
- Charitable donations. You can choose to designate one person to claim the combined amount of both of your donations to registered charities during the year. Donations totaling over $200 result in a larger deduction, so combining these credits can help maximize the credit you receive.
Tips for couples
So, who is the best person to claim credit? Is that the same person that should claim deductions?
Generally, the partner with a higher income should maximize deductions to reduce paying taxes at a higher rate. On the other hand, the partner with the lowest income should claim credits like the medical expense credits, which are based on a certain dollar amount or percentage of your income.
Filing Taxes Tax Experts are always here to help you figure out how tax changes will affect your return, and we look forward to helping you.
If you need any advice on tax-saving strategies from an expert tax accountant in Toronto, Mississauga, Oakville, and Hamilton feel free to reach out to Filing Taxes at 416-479-8532. Schedule an NTR engagement appointment with us and take the first step towards proper management of your finances.
Disclaimer: The information provided on this page is intended to provide general information. The information does not consider your personal situation and is not intended to be used without consultation from accounting and financial professionals. Salman Rundhawa and Filing Taxes will not be held liable for any problems that arise from the usage of the information provided on this page.