Marriage & Common-Law: Tax Implications

What Changes When You Marry or Become Common-Law

• You still file individual tax returns (no joint filing in Canada)
• You must report your spouse's income on your return
• Benefits are calculated based on combined family income
• New tax credits and planning opportunities become available
• Some benefits may be reduced or eliminated

Spousal Tax Credit

If your spouse earns little or no income, you can claim the spousal amount:

• Maximum 2024: $15,705 (federal amount)
• Reduced: Dollar-for-dollar by spouse's net income
• Eliminated: When spouse's income exceeds $15,705
• Tax savings: Up to ~$2,355 federal plus provincial

Eligible Dependant Amount

This credit (formerly "equivalent-to-spouse") is NOT available to married or common-law couples. If you claimed this as a single parent and now have a spouse, you lose this credit.

Impact on Benefits

GST/HST Credit

• One payment per couple instead of two individual payments
• Calculated on combined family net income
• May be reduced if combined income exceeds thresholds

Canada Child Benefit

• Calculated on adjusted family net income
• May be significantly reduced with two incomes
• Only one parent receives CCB (primary caregiver)

Climate Action Incentive

• Family amount instead of two single amounts
• Still includes amount per child

Spousal RRSP Contributions

Marriage unlocks spousal RRSP contributions:

• Higher earner contributes to spouse's RRSP
• Uses contributor's deduction room
• Funds belong to spouse for retirement
• Can equalize retirement income for tax savings later
• Attribution rules: 3-year waiting period for withdrawals

Transfer of Credits

Unused tax credits can be transferred between spouses:

• Age amount: If spouse is 65+ and can't use it
• Pension income amount: Up to $2,000
• Disability amount: If spouse has DTC approval
• Tuition credit: Up to $5,000 of unused current-year tuition

Medical Expenses

Married and common-law couples can pool medical expenses:

• Either spouse can claim all family medical expenses
• Usually lower-income spouse should claim
• Lower income = lower 3% threshold = larger credit

Charitable Donations

Pool donations for maximum benefit:

• Either spouse can claim all family donations
• First $200 gets 15% credit, above gets 29%+
• One spouse claiming $1,000 is better than two claiming $500 each

Capital Gains Planning

Attribution Rules

Be aware of attribution when transferring assets:

• Gifting investments to spouse: Income attributes back to you
• Loans at prescribed rate: Can avoid attribution
• Spouse's own earnings: Not subject to attribution

Principal Residence

• Couples can only designate one principal residence per year
• Plan sales carefully to maximize exemption

Notifying CRA

Update your marital status by:

• Within the first month of the status change
• Using CRA My Account online
• Calling CRA directly
• Filing your tax return with new status

Common-Law vs. Married: Tax Differences

For federal tax purposes, there is virtually no difference:

• Same spousal credit rules
• Same benefit calculations
• Same credit transfers
• Same RRSP options

Some provincial programs may treat common-law differently—check your province's rules.

Same-Sex Couples

All rules apply equally to same-sex married and common-law couples since 2001 (common-law) and 2005 (marriage).

Planning Opportunities

Income Splitting Strategies

• Spousal RRSP contributions
• Prescribed rate loans for investments
• Paying spouse's expenses so they can invest
• Pension splitting in retirement

TFSA Strategy

• Gift spouse money to contribute to their TFSA
• No attribution on TFSA income
• Each spouse has their own TFSA room

What If One Spouse Has Debt to CRA?

• Your refund may be applied to spouse's debt
• CRA can intercept GST/HST credits
• Benefits calculations use combined income regardless
• Consider filing separately if one has outstanding balance

Getting Professional Help

Consider a tax professional if:

• Significant income disparity between spouses
• One spouse has investment income or rental property
• Complex situation involving previous relationship
• First year of marriage/common-law status