Filing Taxes in a Common-Law Relationship: 4 Top Things to Know

Dating? Engaged? In a relationship? Just ‘friends’? We understand the stress of putting labels on relationships in today’s society but it’s particularly important to note where you stand with your partner come tax time.

In fact, if you’ve been wanting to talk about your relationship status with your partner for a while now but haven’t been able to find the right way to approach it, using a tax discussion as a segue isn’t a bad idea. Reason being, if you’re in a common-law relationship, there may be tax implications you’re unaware of, typically in the form of reduced benefits such as the GST/HST credit or Canada Child Benefit.

To ensure you’re as prepared and organized as possible come tax season, we’ve broken down everything you need to know about filing as common law, including how to be sure whether you’re in a common law relationship in the eyes of the CRA, how filing as a common-law couple may impact your taxes and tips for how to maximize your return.

What are the differences between common-law and a spouse?

A spouse is someone with whom you are legally married to while a common-law partner applies to someone who:

  • Has been living with you in a conjugal relationship but is not your spouse for at least 12 consecutive months (so your roommate doesn’t count); or
  • Is the parent to your child

A “child,” for this purpose, includes natural or adoptive children or a child over whom you had custody and control and who was wholly dependent on you for support.

Do common-law couples file one joint tax return?

Regardless of your marital status, you are an individual taxpayer and are required to file your own tax return. If you and your partner qualify as a common-law couple, you will have to include your common-law partner’s name, social insurance number (SIN) and net income (even if it’s zero!) for information purposes only. So, if you’ve never swapped SIN numbers, welcome to the next phase of your relationship!

How do common-law relationships impact tax returns?

The CRA will take into account the total earnings from both parties to identify which credits and benefits you may be eligible for and who they should be allocated to. For example, if you have child care expenses, they can only be claimed by the common-law partner with the lower net income. One of the biggest changes new common-law couples experience is changes to their GST quarterly payment. Many people who qualified for this credit on their own will no longer meet the requirements once they file as common law given the government will combine your net incomes. If you are a common-law couple with no children, you will cease to be eligible for the maximum credit once your combined income is more than $36,976 and will not get any credit at all once it exceeds $48,336.

On the bright side, as a common-law partner, you are likely eligible for a number of claims that could increase your return, including:

  • The spouse or common-law partner amount if you supported your common-law partner and their net income that was less than $11,809 (for 2018)
  • Pooling your Medical expenses and charitable donations
  • Contributing to your common-law partner’s RRSP (which could be advantageous if you are in a long-term relationship)
  • Splitting your  pension income

Are there any tips that can help to maximize a return?

Yes, we’ve got your back! It can help streamline the process if both you and your partner file at the same time. Reason being, it allows you or the tax expert you file with to see the whole picture and determine all of the credits and deductions available to you. In the case of certain benefits, both partners will need to have filed their taxes before they can be issued, such as the Child Tax Benefit. Ensuring both you and your partner are up to date on your taxes is also important when it comes to applying for loans or mortgages, so you may want to consider making the process a yearly date night. Filing taxes over a romantic candle-lit dinner anyone?

What happens if you separate from your common-law partner?

We know it’s tough to think about your relationship taking a turn for the worst, but it’s always good to know the hypothetical. In order to officially be considered separated by the CRA, you and your common-law partner must be separated for a minimum of 90 days. If you’re receiving benefits during your separation, you must notify the CRA by the end of the month from when your relationship status changed and pay back any benefits received during that time period. And you won’t want to do that, trust us, so it’s best to keep the CRA in the loop.

While you might not be ready to change your Facebook status to single, it’s a good idea to keep the CRA in the loop on your love life by filling out the RC65 Marital Status Change form and either mailing it to a tax center near you or taking the easier route and updating your CRA My Account Online profile.

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