Marriage is probably one of the sweetest moments of our lives. It alters our lives drastically. Along with that, marriage brings a lot of complications regarding money. That includes filing your tax returns. In Canada, there is no law related to “Joint” tax returns. However, whether you are married or not, you must file your taxes if you are a taxpayer. So, can married couples file taxes separately in Canada?
The answer to this question is not as simple as it may seem. If you are married or have a common-law partner, you must declare information regarding your spouse. Moreover, you can enjoy several benefits with it. Keep reading this blog you will get to know an in-depth guideline on this. But if you would like to have a consultant then feel free to ask your question to our Spousal Support Lawyer.
Do Married Couples Have to File Taxes Together in Canada?
Do married couples have to file taxes together? This is the first thing you need to know before diving into the complete concept. There is an option to choose whether you and your spouse want to file taxes together or not. The wisest choice would be to file the taxes together as a married couple in Canada.
The best reason behind such a decision is that it will reduce the overall tax you pay for the year. When you decide to pay taxes separately even after being married, the liabilities on the tax amount will be much higher. Conversely, filing taxes together will reduce the penalty on the tax amount. If your income reaches a threshold amount, the facilities you can redeem will get phased out. However, filing taxes together will raise the threshold amount than filing taxes separately.
Furthermore, the income difference between you and your spouse plays almost a decisive role here. For instance, if your total earnings are a lot higher than your spouse’s, the overall household income becomes low. In turn, this will reduce the tax return as well. Therefore, you and your spouse should decide to file taxes together as a married couple.
Do You Have to File Taxes with Your Spouse in Canada?
Filing taxes with your spouse is a choice in Canada. No law demands you to file taxes together. However, it is crucial to understand the standard requirements before deciding which side you will be leaning towards.
One of the most important factors to know is the marriage period. Simply put, you and your spouse will be determined as a married couple throughout a year if you have married before 31st December of that particular year. As a result, deciding on filing the taxes together means that you can pay joint taxes for the whole year.
Furthermore, the overall period of marriage is not exclusively essential to determine whether you can file taxes together or not. For example, as a legally married couple, you do not have to be married for a specific period to be eligible to file taxes with your spouse. On the other hand, you must be living together for a straight 12 months as a common-law couple to file taxes jointly in Canada.
Spouse or Common-law Partner Amount
The spouse or common-law partner amount is a non-refundable tax credit. The credit is created to assist families where one spouse is financially responsible for taking care of the other spouse. According to this amount, you are eligible not to pay taxes as long as you do not earn more than around $14,000 in a year.
In case you are filing taxes when separated but married, you have choices as well. First, you can decide to claim the total sum of exempted support amount in that particular year to your spouse or common-law partner. This amount must be on line 22000 of your return. Apart from this, you can also claim the deductible support amount on line 30300 of your return. However, you must choose any one of the options.
Claiming Spousal Amount
In every country, a citizen has the right not to pay taxes unless he or she earns over a certain amount of income. In Canada, this amount is around 14,000 CAD. If your spouse earns less than this minimum amount of payment, you can claim the difference as a non-refundable spousal tax credit. This will reduce the federal tax amount you owe.
For instance, let’s assume your spouse is a student who earned 6,000 CAD from part-time job earnings throughout a whole year. On the other hand, your income in that year was 70,000 CAD. In this situation, it is evident that your spouse earned less income than the minimum threshold to pay taxes. As a result, you can claim a non-refundable tax credit on the spouse’s amount of earnings. This amount is the difference between the annual threshold amount and the yearly earning of your spouse from the part-time job.
Furthermore, you must remember that any spousal tax credit is also entitled to add an appropriate provincial amount of money. Therefore, when you claim the spousal amount on your tax return, this regional amount is deduced. This can save a lot of money for your family expenses.
Claiming Single on Taxes when Common Law
Being eligible as a common-law couple enables you to determine that you want to file taxes as common law. For this, you and your spouse have to file each of your taxes to the Canada Revenue Agency (CRA). You must include the pieces of information of your common-law partner when you are putting your information. This includes mentioning your partner’s name, social security number, and the net income of your partner.
But what happens when you claim single on taxes when common law? If you are doing such a thing, you would be considered as a fraud who committed a fraudulent act. As a result, you may end up facing inevitable consequences for your actions.
What Is the Penalty for Filing Single When Common Law?
If you and your partner have been living together for more than 12 months straight, you are considered a common-law couple. Any common-law partner must file taxes jointly, which has several advantages. Some of the benefits include being eligible to combine medical receipts and expenses, claiming the Family Tax Cut, contributing to a spousal RRSP, and many more.
However, if you file taxes as single when common law, you will face specific penalties for your actions; first of all, you will be reassessed for all the unpaid taxes with interest. Eventually, you will be ordered to pay the missed taxes not only with an interest amount but also with penalties. In addition to this, you will be denied any benefits from CPP. Finally, you may end up being rejected any pension benefits if your case is found to be deliberately and strategically fraudulent.
Can Married Couples File Taxes Separately in Canada? Often, couples are benefited from filing taxes together in Canada. This is true when the income difference of the spouses or common-law partners is more considerable. However, couples having almost the same earnings can also experience lower taxes through sharing deductions and credits. Nevertheless, you should choose the best option where you do not pay more taxes than you should.