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Tax Benefits for Married Couples in Canada

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Started your new life? Well, as a married couple, you must at least have the basic knowledge about the taxes. After all, getting married or living in a conjugal relationship for over 1 year opens the door to several tax benefits.

Don’t know about the tax benefits for married couples in Canada?

Worry not! as this article will let you know.

Here, you’ll know everything about how things tend to work in taxes when you get married and the prevailing benefits you will get to enjoy as a married couple.

Let’s get started:

Can Married Couples File Taxes Separately in Canada?

Of course, they can. In fact, in Canada, couples don’t need to file a single tax return. Instead, they file tax returns separately. Based on this, they receive a separate tax bill or refund.

Suppose you get married during the tax year. Here, in this case, you have to indicate your status as married in the “information about you” section, along with adding the essential information regarding your spouse like name, social insurance number, net income, employment status, etc.

Next up, the software will create a “coupled” return indicating that you have given all the information regarding you and your spouse needed to file taxes separately. Upon successful completion of all the processes, the software will maximize both of their benefits while generating 2 separate returns at the same time.

8 Tax Benefits for Married Couples Canada

Being married will drastically affect your tax rate, especially in Canada. In fact, there is no such thing as filing “joint” income tax returns here. But to maximize the benefits, the couples need to prepare and file their taxes at the same time. As when you do that, you will get the most out of your credits and deductions while receiving benefits (if anything applies) on a time-to-time basis.

Tons of factors come into the role play once you get married. The same goes for the common-law partners in accordance with the common law in Canada.

Here are some of the important tax benefits that every Canadian couple will be benefitted from:

1. Spousal Tax Credit

In Canada, the BPA (Basic Personal Amount) is a federal tax credit that qualifies you to get all the federal income tax you have paid. To be eligible for receiving the money, your income must be equal to or lower than the Basic Personal Amount, which is currently $14,398 for 2022 and $15,000 for 2023.

And as a married couple, when one partner has an earnings less than the Basic Personal Amount, the other spouse can use that difference to lessen the tax amount they owe by claiming the credit. The tax you have to pay directly depends on your annual income, and getting married does not change the rate. It’s the taxable income that tends to get changed.

2. Pooled Medical Costs

Canadian married couples can combine some of their costs for maximizing their credit accordingly. For instance, to get a bigger tax credit on the overall medical expenses, you must file your medical costs claims as a married couple and have the spouse with the lower-earning claim it.

3. Charitable Donation Tax Credit

To qualify for a non-refundable tax credit, the married couples have to make a donation to the registered charities in Canada. Here, you will get a tax credit of 15% from the very first $200 you donate.

On the contrary, making a donation over $200 will let you claim up to 29%. Hence, to gain access to higher credit, you must combine your charitable contributions and do the filing under the name of one spouse.

4. Transfers

Married couples in Canada can do the tax credits transfer among each other with complete ease as long as the entire amount is not required in one return. This includes pension earnings, tuition, disability, etc. When couples do this, they can effectively lessen the tax they owe.

5. Registered Retirement Savings Plan (RRSPs)

If you have a high income tax bracket and your spouse has contribution room left in their RRSP, then ultimately, your tax will get reduced to balance the incomes after retirement.

Such as if one spouse is over 71 and thus cannot contribute to their Registered Retirement Savings Plan any longer. In such cases, the other spouse can continue their contribution until they reach 71.

6. Investment Dividends

Married couples can also split their investment dividends among themselves to save up on the income tax. In fact, if the couple is already retired, then you can also divide your pension accordingly by giving your spouse a portion of your earnings. Doing this will let you do some up on taxes by landing you in a lower income tax bracket.

7. Pension income split up

Spousal transfer can significantly affect the overall tax rate. So, if you are getting a pension amount, you can definitely transfer them to your spouse, but there is a limit that you cannot exceed here.

Such as, you cannot transfer more than half your pension earnings – which is indeed a good thing. As in this way, both of you get to share the pension and even do some save up on the tax amount.

8. Dependents

When one spouse earns more than the basic amount, the higher earning spouse may have the lower-income spouse as a dependent.

How Do Taxes Work Upon Getting Married?

Marriage tends to have a significant impact on your taxes. When you get married, you will have to file a different tax bracket than the one you used to do while you were single.

Coming to the tax brackets, they are affected directly by the net income of the household. Such as, if you file a joint tax return, your and your spouse’s earnings will be calculated together. It is beneficial for both you and your spouse.

On the other hand, if you have a low income, in that case, you can find yourself paying a higher tax return compared to the high earning spouse.

Do Married Couples Have to File Taxes Jointly in Canada?

As a married couple, it is always a smarter call to file taxes jointly rather than separately. As filing jointly opens the door to numerous tax benefits. Besides, if you don’t inform the CRA (Canada Revenue Agency) about your wedding, you can be fined a marriage tax penalty.

Moreover, filing the joint taxes lessen several liabilities on your taxes. Similarly, some of the benefits can get phased out for paying together. To simply put, the overall tax liability gets reduced as you start reaching the maximum earning threshold.

The overall net earnings of both of you also play a great decisive role. For instance, if your wages are much higher compared to your better half, the total earnings of the household become relatively low – eventually lessening the total amount of tax to be paid off.

On the other hand, if your spouse earns lower compared to the minimum threshold, in that case, their taxes get completely deductible. Meaning, the amount gets reduced manifold compared to the one you would have to pay if your spouse had a higher earning.

To Conclude

That’s all from the discussion about tax benefits for married couples Canada!

Whether you want to file taxes separately or jointly is a tough call that you both need to take. Such as, for doing jointly, you must have that kind of trust in your spouse to share almost everything about your income and other learning sources. Similarly, it has more benefits to offer.

For any kind of doubts about this entire tax process, you are always suggested to take a professional help. As they can guide you in the right direction with their expertise.

Frequently Asked Question

Having confusion regarding the tax benefits for married couples in Canada? Have a look at the below most asked queries to clarify all your doubts right away:

What tax benefits do married couples get?

Married couples filing jointly receive about a $24,800 deduction in the year 2020, while the household heads get $18,650. Combined together, these 2 factors make up a marriage bonus of $7,399 or 3.7% of the adjusted gross revenue.

Do you get a better tax return if you are married?

Obviously, you will get a better tax return if you are married. In fact, married couples jointly provide the most profitable tax outcome. as there are some deductions and credits that get reduced only if you are married and file them together. In other words, these special deductions are not applicable for the unmarried ones and the ones filing separately.

How are married couples taxed in Canada?

Unlike the other countries, Canada tends to follow their own tax rules. Canadian law believes in the freedom of all. Similarly, in the case of the tax return, each Canadian have the full freedom to file their own tax return and indicate their marital status on the tax return along with whom they are legally married and living with.

Can you claim your spouse if they don't work?

Of course not. You cannot claim your spouse as a dependent even if they don't work. In fact, when you are married and live together, you can only file a tax return as either Married Filing Jointly or Married Filing Separately. Here, if one spouse has little or no earnings, in that case, you can file it as MFJ.

When should I file separately after getting married?

Filling separately after marriage may be an ideal option if there is a lack of trust between both of you. Filing jointly requires the full consent of both, while separately doesn't need anything. And there is no chance of suspecting the other one of doing any sort of tax evasion or misfiling with the tax papers.