This post is in honour of Valentine’s Day…I realize that I’m a day late, but we spent yesterday celebrating. Heart-shaped pancakes in the morning, kids’ party in the afternoon, and a date with my hubby in the evening. What a great day!
The answer to the question is a definite yes! While the government hasn’t yet figured out how to tax love itself, if your relationship status changes (whether you update it on facebook or not), your tax bill could change as well.
From single to married or common-law
For Canadian income tax purposes, a “spouse” is someone to whom you are legally married. A common-law partner is someone with whom you have been living in a conjugal relationship for at least 12 continuous months. There are other situations where common law status may apply, so if you have a child or are reconciling with a previous partner, click here to see if you are considered to be “common law”.
Whether you are legally married or are considered a common-law partner, the tax results are about the same. The income tax advantages of being married/common law include:
- pension income splittingif you otherwise qualify
- spouse or common law partner amount for low or no income spouses
- being able to transfer tuitionand education credits from one partner to the other in certain circumstances
- the option to take advantage of spousal/common-law partner RRSP’s
- you can withdraw funds from your RRSP under the lifelong learning plan (LLP) and use the money to finance your partner’s education
- pooling medical expenses, donations, and political contributions in order to obtain a higher tax credit
- being able to move dividend incomefrom one return to another in certain circumstances
- utilizing certain tax credits if your spouse/common-law partner is unable to use them himself/herself: Disability amount, pension income amount, age amount
- in certain circumstances, you can claim the amount for children for your spouse’s children even if they are not your biological children
The tax disadvantages of being married or in a common-law relationship:
- certain tax credits are eroded based on family income (which will presumably be higher when you are counting your income plus your partner’s income):
- Canada Child tax benefit
- GST/HST creditand related provincial tax credits
- certain provincial tax credits
- Working Income Tax Benefit
We were together and now “it’s complicated…”
Support payments made or received under a court order or written agreement may be tax deductible/taxable depending on their nature. There are lots of rules on these situations and even more exceptions. If you’d like to do some background reading, a good place to start is here, but you will definitely need professional advice specific to your own situation.