Love & taxes

Love & taxes – yes they do go together!

Are you part of the growing number of married Canadians, or have you recently tied the knot? For many, the past few years have been as good a time as any to get married. As newlyweds, there will be many firsts ahead, not the least of which is the first time you will file your tax return as a married individual.

That’s right; you may be surprised to learn that getting married affects how you are taxed in Canada. And with our close proximity to the US, it’s not really surprising that many Canadians are under the mistaken belief that they can file their tax returns jointly, which is allowed in the US. This is not the case in Canada. Married couples are required to file their tax returns separately.

Even though you file your returns separately, there are a number of changes in how your taxes and credits are calculated that are important for you to note. In addition, although you aren’t allowed to file jointly, you nevertheless must indicate your spouse’s income on each respective return. And it doesn’t end there; there are also a number of rules that prevent married couples from shifting income between related groups.

And if you are thinking of filing your return as though you are still single, think again! Failing to report your marital status correctly on your return could result in a reassessment which might end up costing you additional interest and penalties.

As with any rite of passage, there are changes you must contend with, both good and bad; but don’t let this put a damper on your newlywed bliss. To help you stay on track, here are a few things to consider as you prepare your tax returns as a married couple.

6 Steps you should know

1. Inform the CRA of your change in marital status
   Be sure to update the Canada Revenue Agency about your marital status, either online or by calling them directly.
2. Report your spouse’s income
   When filing your T1 return, tick the box that says ‘married’ and include your spouse’s net income. Many tax credits and supplements are calculated based on your combined incomes, such as the GST/HST credit and the working income tax credit.
3. Combine certain credits for maximum benefit
   Medical expenses and charitable donations can be combined and claimed on either spouse’s return. Typically, medical expenses are best claimed on the lower-income spouse’s return, and charitable donations on the higher-income spouse’s return—but check what works best for your situation.
4. Use flexible tax credits strategically
   Some credits, like the public transit amount or the home buyers’ amount, can be claimed by either spouse. This flexibility lets you decide where it provides the most benefit.
5. Transfer unused credits if possible
   If one spouse cannot fully use certain non-refundable credits, they may be transferable to the other spouse’s return—for example, tuition and education amounts.
6. Allocate investment income appropriately
   For joint non-registered accounts, report investment income based on each spouse’s contributions. If contributions were equal, income is generally split equally.

Now go on, celebrate your life together and enjoy the moment. But don’t be surprised if, years from now, you’re grateful you took the time to get your tax affairs in order – right from the start.