In Tax, I Do: Tax Benefits of Married Couples in Canada

To get married is to go on a new chapter in life with the love of your life. Once the marriage is done and the couple have moved into their new home, there are things that they must do to keep up with their new marital status. One of which is filing taxes. The Canada Revenue Agency expects married couples to change their online system status within the month of their wedding. You can do this via mail or on the CRA website. After the process, you are expected to report any credits your spouse claims or any payments your spouse owes.

Can Married Couples File Taxes Separately in Canada?

In Canada, Canadian couples do not file a single tax return. Instead, they file separate tax returns and receive a separate tax bill or tax refund.

Suppose you are married in the tax year which you are filing. In that case, you must indicate your status as married in the “information about you” section of the tax return and include information about your spouse such as his/her name, social insurance number, net income, and employment status. After this process, your tax preparation software may include an option to prepare a “coupled” return indicating that you have provided the information about you and your spouse together but you are filing separately once you have completed your tax return. By doing this, the software maximizes the benefits of the couple while still generating two separate returns.

Tax Benefits for Married Couples in Canada

There is no such thing as filing “joint” income tax returns in Canada. However, to maximize the tax benefits of married couples, you and your spouse should prepare and file your taxes simultaneously. When you do this, you get the most out of your credits and deductions and receive benefits (if any apply) on a timely basis.

Here are other tax benefits couples in Canada get to benefit from:

Spousal Tax Credit

In Canada, the Basic Personal Amount (BPA) is a federal tax credit that enables you to get all the federal income tax you’ve paid. To qualify to receive the money, your income should be at or lower than the BPA which is $14,398 for 2022 and $15,000 for 2023. As a married couple, should one partner earn less than the BPA, the other spouse can use that difference to lower the amount of taxes they owe by claiming the spousal tax credit.

Pooled Medical Expenses

Married couples in Canada can combine some of their expenses to maximize their tax credits. You can file your medical expense claims as a couple to get a bigger medical expense tax credit and have the spouse with the lower income claim it on their tax return.

Charitable Donation Tax Credit

When married couples donate to registered charities in Canada, you will be eligible for a non-refundable tax credit. You can receive a tax credit of 15% from the first $200 you donate. On the other hand, donating over $200 allows you to claim up to 29%. When you file as a couple, you can combine your charitable contributions and file it under one spouse to gain access to a higher tax credit.

Transfers

Married couples in Canada can transfer certain tax credits to each other so long as the entire amount is not needed in one return. These include pension income, tuition, and disability. When couples do this, they can reduce the tax they owe.

Dependents

Married couples in Canada enjoy having their lower-income spouse as dependent. When one spouse earns more than the basic tax amount, the higher income spouse may have them as a dependent.

Registered Retirement Savings Plan (RRSPs)

If you are a spouse with a high-income tax bracket and your spouse has some contribution room left in their Registered Retirement Savings Plan (RRSP), contributing to your spouse’s RRSP will reduce the tax you have to pay and help balance incomes after retirement. If one spouse is over 71 and can't contribute to their RRSP anymore, their spouse, should they be under 71, can continue to contribute to the RRSP until they reach the age of 71.

Investment Dividends

Married couples in Canada can also divide investment dividends between themselves to save on income tax. If the couple is already retired, you can also split your pension by giving your spouse a portion of your income. Doing so will allow you to save on taxes by landing in a lower income tax bracket.

What if you are no longer married?

If your marriage does not work out despite your efforts and you decide to divorce, you and your spouse should inform the CRA about the change in your marital status within a month of the end of your marriage. If you are separated only, you should also inform them if you are separated for more than 90 days.

May this article inform you about the tax benefits married couples in Canada enjoy. If you need help sending money from Canada to anywhere in the world, perhaps your family living abroad, avail of RemitBee’s remittance services. We offer competitive rates and minimal fees in exchange for a fast, secure, and convenient money transfer service. When you send money over $500 in one transaction, we will waive your transfer fee!

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