Do Married Couples Have to File Taxes Together in Canada?

When the eventful wedding ends, married couples start planning their new life with new plans and dreams. And among all other things, one of the most important facts is to organize the finance. And when that time comes, a common question all couples have in their mind is- do married couples have to file taxes together in Canada?

Here, we will explain this confusing issue so that you can understand it quickly and take the necessary steps to file your tax while saving some money. Let’s start!

What is the Canadian Tax Rule?

The Canadian tax rule states that every citizen in Canada has to file a tax return in a separate, individual file, even when they are married. However, in the tax return form, you will find a section stating “information about you” where you need the following information:

• Name of your spouse
• Social insurance number
• Employment status
• Net Income

There is no scope for you to decide about including your spouse’s name. It is mandatory to include your status and name once you get married in the tax year when filling out the form. Now that you have changed your marital status, you can include the ‘coupled return’ option if you want to.

Otherwise, you will receive your tax return separately from your partner.

How to Include Coupled Return Option?

You may have to use tax preparation software to request a couple’s return. This software will help you see the tax return calculation by analyzing your and your partner’s incomes. After you complete providing all your information in separate files and the tax return is completed, you can then choose the option to get the return together.

When you choose Coupled Return, the software calculates and lets you know the separate file tax returns. Finally, you and your spouse have complete tax returns. The software will also show you the maximized benefits of choosing the coupled return. But it is better to report other credit, CCB/GHT/HST, or any payment that your partner owes or claims.

Why Should You Not Choose Coupled Return?

Although you will minimize the amount of tax if you file a joint return, you should consider the individual tax return option. Why? Continue reading:

• When filing a joint tax return, you are responsible for both returns. This situation both helps and creates problems. If one is earning more than the other, you may pay the excess amount of tax of the money that is not yours.
• To receive an extensive tax credit, an individual may file separately.
• Opportunity to record financial aspects, for example, incomes, deductions, and exemptions on different tax forms.
• One spouse’s medical expenses and miscellaneous itemized deductions do not affect the other.

Different Earning Methods Issue While Filing for Taxes

In general, if the earning source is from W-2 wages or any self-employment business, it does not make any difference in tax filing. But if one spouse earns W-2 wages and the other one does business, then the tax amount makes a big difference according to both earnings. At that time, they may get some advantage in tax filing.

What are the Disadvantages of Filing a Tax File Separately?

Again, there are many reasons why most couples choose the option of a couple tax return. You can decide to file taxes separately. But then you may have to face the following disadvantages:

• IRS-provided services, deductions, and the amount of money you have spent on tax factors will be reduced.
• You have to pay more tax than you would have spent while paying together.
• You will lose several tax credits.
• Your contribution limit to the retirement plan of your partner will be lower.
• The tax rate will be higher if filed separately.
• Separating taxes will be a hassle if the couple decides to get divorced.

When One Spouse Earns More Than the Other?

A joint tax return is a better option if one spouse earns more than the other. It will help the partner who makes more to reduce some tax as they are spreading the earnings on the family.

What are the Tax Benefits for Married Couples in Canada?

When considering the benefits of filing taxes as a married couple, there are several advantages to take into account. Opting for a joint return allows couples to combine their incomes, potentially placing them in a lower tax bracket and reducing the overall tax burden.

It enables access to certain tax credits and deductions that might not be available or as beneficial when filed separately. Filing jointly can streamline the process, making it simpler and more convenient for couples to manage their taxes together.

Pooling Medical Expenses Together

Do you know you can maximize your tax credits together? If you are married in Canada, you can jointly file a claim regarding medical expenses. You will receive a more significant tax credit on medical costs.

Reducing Tax by Transferring Credits

Couples can lower the amount of tax they owe by transferring certain tax credits to each other. In terms of tuition fees, income, and any other disability of the other spouse, you can share a certain amount of credit.

Contributions in Savings Plan

Another way of reducing tax is by contributing to Registered Retirement Savings Plan (RRSPs). You can pay less tax when covering your spouse’s RRSP plan. It’s a good practice when you are a higher-income spouse, as you can save money and at the same time reduce taxes.

Which One is Better?

Every married couple lives in a different financial situation. However, you may want to get a coupled return to earn more federal tax credit.

You need to earn less than the BPA to get a federal tax credit. BPA means Basic Personal Amount. When one of the couple’s incomes is less than the mentioned BPA of the year, the other partner can add the difference when filing the tax. Since the income is less than BPA, the couple can claim the spousal tax credit and lower their tax amount.

Do Married Couples Have to File Taxes Together in Canada?

In Canada, married couples don’t file their taxes together as a joint return like in some other countries, such as the United States. Instead, each files their own tax return separately. However, there are certain tax credits and deductions available to married or common-law partners that can be claimed on each individual’s separate tax return. So, while you file separately, you can still benefit from certain tax advantages related to your marital status.

Filing Taxes When Separated but married in Canada

Since you have the option to prepare the tax returns in an uncoupled method, you and your partner can choose the options to receive a tax return in such a way. You do not need to change your marital status, as you are still legally married. This is known as Married Filing Separately.

How Can a Lawyer Help With Legal Advice

The tax company may calculate a higher tax amount that you do not understand. So, it is best to consult with an experienced lawyer to determine the correct amount based on your income and to prepare the entire file. Furthermore, a lawyer can provide you with all tax-related legal advice.

You can contact us because our lawyers have 15 to 20 years of experience in this area. We do not want your and your partner’s hard-earned money to end up in the hands of strangers.

Conclusion:

We are hoping that you got your answers to “Do Married Couples Have to File Taxes Together in Canada?” But still, if you are confused about it, the wise way to deal with the problem is to consult a tax lawyer.

You can ask your consultant Do You Have to File Taxes with Your Spouse or not, and they will resolve your tax issues and involve you in any dispute with CRA. Make sure you and your partner make the same decision about the tax issues.

If you are going through separation or divorce, try to solve the financial factors in the presence of a lawyer. This will help both of you to have an equal share.

Frequently Asked Questions