What are the Tax Benefits for Married Couples Canada?

What Are The Tax Benefits For Married Couples Canada

Getting married is one of the major occasions that brings loved ones together. But there are also some financial perks to tying the knot in Canada, particularly regarding taxes. Many couples fear the tax amount after marriage. But some tax features could ease your married life expenses! To help you, we will explore the tax benefits available to married couples in this blog!

What are the Tax Benefits for Married Couples Canada?

Tax benefits are features in the tax code that can reduce your tax bill. They come in a few forms: deductions, credits, exclusions, and exemptions. 

  • Deductions: Deductions lower your taxable income, meaning you pay taxes on a smaller amount. 
  • Credits: Credits directly reduce the tax owed, sometimes even resulting in a refund. 
  • Exclusions: Exclusions are certain types of income the government doesn’t tax at all.
  • Exemptions: Exemptions reduce the income tax you owe based on your marital status or dependents. 

Why Do the Benefits Exist? 

These benefits exist to encourage specific behaviours like charitable giving. They also provide relief to certain taxpayers (like low-income families). You can save a lot of money after reading and understanding these benefits and their application process. Hereby, a tax lawyer can give wise suggestions.

Can Married Couples File Taxes Separately in Canada?

Married couples don’t have to file their taxes jointly. It’s generally not recommended. Since many tax benefits hinge on a couple’s combined income, filing separately could mean missing out on valuable tax breaks.

8 Tax Benefits for Married Couples in Canada

The best 8 tax benefits for married couples in Canada are:

  • Spousal Tax Credit
  • Pooled Medical Costs
  • Charitable Donation Tax Credit
  • Transfers
  • Registered Retirement Savings Plan (RRSPs)
  • Investment Dividends
  • Pension Income Split Up
  • Dependents

Spousal Tax Credit

This credit helps reduce the tax burden for the higher-earning spouse by offering a non-refundable credit based on the lower-earning spouse’s income.

Pooled Medical Costs

You can combine medical expenses for you, your spouse, and any dependents for a potentially larger tax credit. The spouse with the lower income claiming the expenses often maximizes this benefit.

Charitable Donation Tax Credit

Like medical expenses, charitable donations can be pooled. It allows the couple to claim a bigger tax credit on their combined contributions.

Transfers

Certain unused tax credits, like tuition or disability amounts, can be transferred between spouses to reduce tax liability further.

Registered Retirement Savings Plan (RRSPs)

Contributing to a spousal RRSP allows you to reduce your current taxable income while providing retirement benefits for your spouse.

Investment Dividends

Dividends from investments held by one spouse can be reported on the other spouse’s tax return if it results in a lower tax bill overall.

Pension Income Split Up

If one spouse has a significantly higher pension income, they can split a portion with their spouse to potentially reduce their combined tax liability.

Dependents

You can claim eligible dependents like children on your tax return, and the income of a lower-earning spouse can maximize the value of these credits.

How Do Taxes Work Upon Getting Married?

Getting married itself doesn’t trigger any immediate tax changes. In fact, your tax return for the year following your wedding will reflect your combined marital status.

Do Married Couples Have to File Taxes Jointly in Canada?

No, married couples are not required to file their taxes jointly. However, as mentioned earlier, filing separately often means missing out on the tax benefits available to married couples.

How to File Taxes as a Married Couple in Canada?

Canadian couples can easily start returning taxes after marriage! It is not much different. Here’s the breakdown of the steps:

  1. First, let the CRA know you’re officially a duo!
  2. Start the filling process, which is similar to your pre-marriage routine.
  3. Just enter the updated information on your annual tax return.
  4. File online, by mail, with software, or hire a lawyer for smooth operation.
  5. Plan and file before the deadline to claim all the tax breaks for married couples.

What Happens to Marriage Tax When You Are No Longer Married?

Divorce, separation, or losing your spouse changes your Canadian tax rules. After such incidents, you must inform the CRA promptly to avoid tax filing errors. 

Losing Tax Benefits

Tax benefits like spousal tax credits and income splitting with a spousal RRSP may disappear after separation. Benefits based on combined income, like the Canada Child Benefit, could also be impacted.

Requirement for Tax Benefits

For divorces, you have to provide the legal end date. Separations require living apart for 90 days due to relationship breakdown. If your spouse passed away, the state will consider you married for tax purposes.

Final Words

Married couples in Canada can optimize their tax filings and save significant money with the tax benefits available. But we always suggest consulting a tax professional to ensure you take full advantage of all tax breaks applicable to your situation. So contact the best law agencies in Canada.

FAQs

Do married couples get any marriage benefits?

Joint fillers received a $24,800 deduction in 2020, while the household heads got an $18,650 deduction. These 2 factors fill a marriage bonus of $7,399 or 3.7% of the adjusted gross revenue.

Is it possible to get a better tax return after marriage?

Yes, married couples get better opportunities in terms of tax. There are an exceptional amount of deductions and credits for married couples. Common law partners cannot avail of those benefits.

When should one spouse fill in taxes separately after marriage?

If the couples have a lack of trust in each other, they can choose the option to pay separately. In a joint period, they must have full consent. After separation, they do not require anything else. 

Can husband and wife split income in Canada?

In Canada, married couples can share pension income for tax purposes, even if one spouse earns significantly more.  This is called pension income splitting and requires both spouses to be residents of Canada for most of the tax year.

Who is eligible for splitting income in Canada?

To split income in Canada, you and your spouse or common-law partner typically need to be residents of Canada and live together throughout the tax year. Exceptions can be made for separations due to medical reasons, education, or business purposes.

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