If you recently married or met the criteria for being considered common-law, the change in your status will certainly affect how you file your taxes.
Here are a few pointers on what to expect:
1. For Better or Worse
When your marital status changes, so does your tax situation.
How much it changes depends on a number of factors, including available credits and each spouse’s income level. If neither of you has a dependent and your income levels are comparable, you won’t notice much of a difference. You may be in for a pleasant surprise if one spouse has a significantly lower income or a plethora of credits to claim.
2. Transferable Credits
If you file as married (or common-law), you could transfer certain credits to your spouse if you don’t need them first.
If your spouse does not use the full amount of any of these credits, you can transfer the unused portion to your own return at line 326:
- Age amount
- Tuition amount
- Disability amount
- Pension income amount
3. Combining Credits
You can now pool certain expenses as a couple and have one spouse claim the total.
Among the pooled credits are:
- Medical expenses for yourself, your spouse, and your (or your spouse’s or common-law partner’s) children born in 1998 or later – line 330
- Medical expenses for other dependants you support such as your parents or grandparents – line 331
- Charitable donations – line 349
For example, If you and your spouse both make charitable contributions, you can have your spouse claim the total amount of your contributions. Because donations totaling more than $200 qualify for a larger deduction, combining these credits can result in significant savings.
4. Pension Splitting
If one spouse has eligible pension income and is the higher earner, splitting the pension income may result in a lower overall bottom line for you and your spouse. Although no money is exchanged, allocating a portion of pension income to a lower-earning spouse may place the higher-earning spouse in a lower tax bracket. This can result in a substantial tax break for the couple overall.
5. Joint Return vs. Coupled Return
Tax returns are filed individually in Canada, regardless of marital status.
A common misconception among newlyweds is that filing only one “joint” tax return is required. Each spouse must file his or her own tax return with the CRA.
“Coupled” returns are different. While each spouse will eventually file an individual tax return, the returns are prepared together. If you want to split or combine any of the credits listed above, a coupled return is the way to go.
Whether you’ve just tied the knot or about to celebrate your diamond anniversary, IDM has you covered. Talk to your IDM tax advisor now so you can easily and automatically maximize all of your credits and deductions at tax time.
