How Are Married Couples Taxed In Canada?

Marriage changes everything – from your lifestyle to finances to tax situations. There are many more challenges along the way. One of them is to file for taxes as a couple. We’ve got a question repeatedly from married couples in Canada – can married couples file taxes separately in Canada.

Well, having a common-law partner, or being married, is a blessing in many ways. Marriage may change the way you file your annual tax return. However, it doesn’t change the actual tax rate. Instead, you may be eligible for additional tax aids and spousal rollovers.

Many newly married Canadians wonder if they pay taxes separately. Everyone should pay at the due time as a responsible citizen. The amount of taxes may differ depending on the income of two self-employed couples. Married couples can pay taxes separately.

In this article, we’ll clear conceptions about how married couples are taxed in Canada. You need to know about filing taxes with your married or living common-law partner.

Can Married Couples File Taxes Separately?

There is a tax rule in Canada that doesn’t allow common-law partners to file joint income tax returns. Every Canadian citizen should file his or her own tax returns. But, you must mention the marital status on the return.

There is no option to decide whether to include your marital status on the return. In fact, you also need to include your spouse on your tax return. As a married couple, you may need to file your income tax returns separately.

It doesn’t mean you both need to be totally separate. Couples can file their taxes separately. But, it is wise to prepare and file your taxes at the same time. Thus, you can get the most out of all the tax credits and deductions.

Processing your taxes together can simplify the whole process. It will avoid delays in valuations and payments. What if you both don’t file together? The one among both who has already filed taxes may need to adjust his/her tax return. It may be possible, but no doubt it’s an annoyance.

Conditions That Must Be Fulfilled

At first, you must state that you have a spouse or common-law partner. Your relationship must satisfy the following conditions;

  • Your spouse has to be the one with whom you are legally married.
  • You both are living in a conjugal relationship for at least 12 months or more.
  • You have a child with that person. (Either by adoption or by birth).

The Canada Revenue Agency (CRA) considers your marital status by the information you’ve given. In short, your marital status has a crucial impact on your tax return. The CRA will combine both of your incomes to calculate benefits like the GST/HST credit or Canada child benefit.

How to File Tax Returns as Married Couples?

Say you are recently married or living in a common-law relationship in the tax year you’re filling. You must include the details information about your spouse in the “information about you” section of the tax return. Include the following information in that particular section;

  • Name
  • Social Insurance Number (SIN)
  • Employment status
  • Net income

There should have an option to make a coupled return in your tax preparation software. It denotes you are putting your and your spouse’s information together. But, you’ll file individually once your tax return is completed.

Thus, the tax return software increases the benefits for both as a whole. They will still generate your tax return separately. In case your partner claims tax credits, for example, GST/HST, also you must report the claim.

Once you file your tax return, the CRA will analyze a few things. They will check whether you both are living together for at least 12 months. If you are living for less than 12 months, CRA will check whether you share a child by birth or adoption.

If your income is higher than your spouse, you should maximize your deductions. Thus, you can minimize paying taxes at a higher rate. Indeed, the CRA doesn’t always consider the deduction.

Breaking Up

Paying taxes to the Canadian government will let you enjoy the benefits regarding life insurance, health issue, pension, etc. You must file an income tax return to get all the benefits, even if you’re married.

In fact, you’ll get maximum benefits when you both file tax returns separately but at the same time. Many professional lawyers will help you know the amount of taxes to be given. You should contact an experienced lawyer for help.