Do married Couples have to file taxes together?
In Canada, married and common-law couples do not have to file joint tax returns.
Each person must file their own tax returns even when in a married or common-law relationship.
You must indicate your marital status on your tax returns, as well as information about your spouse.
Update your Status
It's important to update your marital status with the Canada Revenue Agency (CRA) as soon as possible after the change, but no later than the end of the month following your marriage.
You can inform CRA through your online account, by phone, or by mail.
Tax Benefits for Couples
Credit Transfers: You can transfer certain credits to your partner if you don’t need them. Credits such as tuition amounts, disability amounts, age amounts, and pension amounts can be transferred to your partner.
Combining Credits: Some expenses can be combined so one spouse can claim the total tax credit. This includes medical expenses and charitable donations.
Spousal Tax Credit: If one spouse has very little or no income, the other spouse may be able to claim the spousal tax credit.
Pension Income Splitting: Couples can split eligible pension income, which can help in significant tax savings.
Simplified Process: Filing a joint return helps simplify the tax filing process by consolidating both spouses' incomes and deductions into a single return, reducing paperwork and the potential for errors.
RRSP Contributions: Contributing to a spousal RRSP can provide tax advantages, especially if there is a significant income difference between the partners.
How to Maximize Your Refund
Use TAXTRON software that offers “coupled” returns. The software automatically allocates credits and deductions efficiently between partners, maximizing the overall refund.
Consider having the lower-income spouse claim certain credits like medical expenses. This strategy can often result in greater tax savings due to income thresholds for some credits.
Pool your charitable donations on one return. This can potentially qualify for higher credit rates.
If applicable, check for “pension-splitting” options. This can be particularly beneficial if one partner is in a lower tax bracket, possibly reducing your overall tax burden.
Consider the benefits of making spousal RRSP contributions. This can be an effective way to balance retirement savings and potentially lower your current tax liability.
The goal is to optimize the household overall tax situation, not individual refunds. A decrease in one partner’s refund might be offset by an increase in the other’s, resulting in a net benefit for the couple.
Drawbacks of Filing Taxes as a Couple
Loss of Certain Benefits: Your total combined household income may disqualify or decrease you from income-based benefits such as GST/HST, CCB, or certain provincial benefits.
Reduced Eligibility for Credits: Some tax credits have income thresholds based on family income. As a couple, you may no longer qualify for credits you were eligible for when you were single.
Pension Income Splitting Limitations: Not all types of pension income qualify for pension splitting, such as CPP and OAS payments.
Reduced Flexibility in Filing Strategies: Some tax reduction strategies available to single filers may no longer be applicable when filing as a couple.
Possibility of Disagreements: Couples may disagree on how to handle certain tax decisions or allocate credits and deductions.
Keep in mind that despite these drawbacks, many couples find that the benefits of filing taxes together outweigh the disadvantages. Hence, it’s advisable to consult with qualified tax experts.
For more information, visit: Canada Revenue Agency
