How Does Being Married Affect Your Tax Rate In Canada? Of course it does! Being Married changes your finances in so many ways, including the way you file your annual tax return. Being married, or having a common-law partner, impacts your tax rate and may render you eligible to receive additional tax benefits.
Rajiv Juneja, CGA in Edmonton, says that marriage allows for benefits such as “the spousal amount and transfers from one spouse to another.” These benefits “may result in a higher return,” he says.
Here’s How Being Married Affects Your Tax Rate In Canada:
Taxable Income and Tax Rate
Your tax rate is calculated from your taxable income. In 2018, for example, if you earn under $45,282 in taxable income, your tax rate would be 15 percent. If you earned from $45,283 to $90,563, your tax rate goes up to 20.5 percent.
If you are under $140,388, and you earned over $90,563, your rate would be 26 percent. And, you are under $200,000 and you earned over $140,388, your tax rate would be 29 percent. Finally, taxable income over $200,000 is taxed at a rate of 33%.
When you have a spouse or common-law partner and combine income and expenses, your taxable income and tax rate could increase or decrease.
A significant tax benefit of marriage is spousal transfers. If your common-law partner or spouse does not need all of her non-refundable credits, she can transfer them to you to reduce your tax liability. There are some non-refundable credits eligible for spousal transfer.
These include the age amount, the pension income amount, the disability amount and tuition and education expenses.
As an example, say your spouse is permitted to deduct $4,000 worth of these credits from her tax amount, but she only has $2,000 worth of tax owed.
Because she only needs $2,000 worth of these credits to reduce her tax liability to $0, you could use the other $2,000 to reduce your tax liability.
Spousal Amount and Other Non-refundable Credits
Some taxpayers benefit from the spousal amount. If you supported your spouse at any time during the year and his net income was less than $11,327, as of 2015, this is a non-refundable credit you can claim.
The difference between your spouse’s income and $11,327 is the amount you receive for the spousal amount.
Other non-refundable credits may be added together and claimed on your return, or on your spouse’s return. According to Juneja, “a spouse’s medical expenses and charitable contributions can be claimed.”
You and your spouse’s public transit expenses also may be added into one pool and claimed by either of you on your tax return.
If you or your spouse purchased a home during the tax year, you may qualify for the homebuyer’s amount of $5,000.
According to CRA, to apply for this type of credit, neither you nor your spouse may have lived in a home that you owned for four years prior to the purchase of your new home.
Tax Benefits and Children
Married couples and common law-partners with children may receive additional benefits. Many kids qualify for child tax benefits based on income levels.
The Canada Child Benefit is a tax-free monthly payment for families to assist them with the cost of raising children under the age of 18.
To receive these benefits, you must file a tax return,” Juneja explains. You also must live with the child and be the his/her primary caregiver. In addition, one spouse must be a citizen of Canada, a permanent resident, protected person or temporary resident.
You can also see the eligibility criteria for the Canadian Child Benefit.