Chances are pretty good that in the weeks leading up to and following your wedding, a million things have crossed your mind: where to get married, whom to invite, whether to give chocolates or mints as wedding favours. But one thing you probably haven't thought of is how that change in status affects your taxes.
And it does. If you married in 2010, or you've been living in a conjugal relationship (same-sex or opposite-sex) for 12 months, the Canada Revenue Agency expects you to file your tax returns as married people.
Emily Smart, 30, and Rob Porter, 34, got married last fall (they tied the knot on 10/10/10). She does freelance publicity for a record label in Toronto, and he's a visual artist who works in film and television. As for their changed tax situation, Ms. Smart says: "We probably joked about it. But I don't think we were thinking about that."
Indeed, they are just now finding out each other's social insurance numbers and "sharing our net incomes with a certain amount of shame and embarrassment," Ms. Smart says.
While Mr. Porter has his return prepared by professionals, Ms. Smart does her own - she doesn't believe anyone will be as careful to include every possible item. "I'm not so mathematically inclined," she laughs, though she's obviously more on the ball than she admits. "I'm self-employed and that's the way I file my taxes. I get a bunch of deductions and I try to maximize them."
Neither of them were aware of how marriage affects their tax situation. Her running joke to him: "Don't you do anything to take away from my deductions."
There are definitely a few drawbacks, tax-wise, to getting married, but there are also benefits. Understanding how marital status affects your taxes - for better and for worse - is important.
- Ms. Smart may joke about her deductions being tampered with, but when you're married, says John Mott, a chartered accountant in Toronto, the CRA looks at family income when calculating your entitlement to certain provincial tax credits, the federal GST credit, the child tax benefit and so on. You may lose a couple hundred dollars.
- If each partner owned a condo or house before they married, and they sold them to buy a new home together, only one of the sold properties will be tax-exempt - even though both would have been exempt if the couple hadn't married.
- If one spouse doesn't have income, the working spouse is entitled to a marital tax credit, Mr. Mott says. The credit could be worth a couple thousand dollars. If one is working and the other is in school, the student can transfer his or her tuition claim to the working spouse.
- If you're single, you can only claim medical expenses that exceed 3 per cent of your net income. Married couples can pool medical expenses and put them on the tax return of the spouse with the lower income. The same strategy applies to charitable donations.
- If one spouse is not working or is at home raising children, the working spouse can contribute to the other's RRSP. After two years, it can be withdrawn at the lower tax rate. "It's sort of a way of income splitting," says Christie Henderson, managing partner of Henderson Partners in Oakville, Ont., and author of 78 Tax Tips for Canadians for Dummies.
- Every individual, married or otherwise, must file their own tax return, but it's a good idea to prepare them with your spouse even if you see different accountants. If you don't, says Ms. Henderson, "you do miss a lot of maximizing of benefits."
In the years ahead, there are more benefits for older married couples. It pays to figure out how to make the best of marriage, tax-wise, and that needs to be done as soon as you fit the CRA's definition of being married.
Mr. Mott had a client who'd been claiming she was single but had been living with a man for several years. CRA matched the addresses and she had to declare bankruptcy as a result of tax benefits she had to pay back.
Ms. Smart concedes she and Mr. Porter have a lot to learn. "I just want to get through and see how much money I owe that I don't have."
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