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Canadian tax law does not permit spouses or common-law partners to file joint tax returns, unlike in other countries like the U.S. Every Canadian prepares their own tax return and indicates their marital status and the names of their spouse and common-law partners.Your tax return does not allow you to claim your marital status. You must include the name of your spouse once married. For two people to be considered common-law, they must have lived together for at least twelve months or immediately after having a child.The CRA learns your true marital status by using your tax records, applying for credits and deductions, and submitting other information. For income-tested benefits like the GST/HST credit and Canada Child Benefit, the entire family's income is combined since marital status has a significant impact on your return. Charitable contributions and medical expenses are tax-deductible for married couples.The government will require you to repay benefits received because you had an incorrect marital status, along with interest and penalty. This practice constitutes tax fraud.
Filing as Married
You must note your status as married or in a common-law relationship in the "information about you" section of your tax return if you were married or in a common-law relationship in the tax year for which you are filing. Besides your name, social security number, net income, and employer name, you must include information about your spouse. When preparing your tax return, you could prepare a 'coupled' return, where you enter the information for both you and your spouse together, but you file separately after you complete it. In this way, both returns are still generated while maximizing the benefits for the couple as a whole. You must report any credits or payments your spouse is owed, such as the CCB or GST/HST.To qualify as common-law partners, it is necessary to have lived together in a conjugal relationship for the last 12 months. You and your partner can be considered common-law partners, even if you've been together for fewer than 12 months, if you have a child together or if one of you supports the other one's child.To minimize paying taxes at a higher rate, the spouse with a higher income should maximize deductions. However, according to the Canada Revenue Agency, you can't always pass deductions onto the spouse. The person with a lower income can claim some of the child care expenses. However, there are exceptions, for example, if you or your spouse spend money on child care.
Pros and Cons of Filing as Married
Changing your marital status will change your eligibility for deductions and benefits. If you each sold a property for the purpose of buying your home together, only one of those properties might be exempt from taxes. One of the sales may result in capital gains tax due to the sale of assets.An additional way to lower a couple's tax bill is through transfers. You may be able to claim part of a spouse's college tuition if they need not take the full credit to reduce their tax bill. Other possible transfers include disability income, pension income, and age. You may also claim a tax credit if your partner's income is below a certain threshold. Medical expenses can be pooled and deducted from the partner's tax return, who can utilize them better. The same is true for charitable contributions.
Conclusion
There's a world of difference between filing personal tax returns and couple tax returns. We would suggest partnering with a professional accounting firm. The CPA in that accounting firm will have experience handling all these matters and help you file your taxes. You can contact our tax experts at any time. They will surely help you out, whether you need help with personal tax or couples tax filing.