Are you familiar with the difference between Marriage And Common-Law Relationship? It is good to know how the Canada Revenue Agency classifies your relationship, and find out the resulting implications for your taxes.
Table of Contents
The Definition of Marriage
If you were legally married before or during the year for which you are filling your tax, the Canada Revenue Agency (CRA) will consider you to be a married person. When completing your return, you must report a variety of information, including your spouse’s name, net income, and employment status, as well as whether or not you receive certain benefits, such as the Canada Child Benefit.
The Definition of a Common-Law Relationship
If you have lived together with your partner for more than 12 consecutive months, the CRA considers you to be in a common-law relationship, or if you have a child together, either related to you by blood or through adoption, or if you have primary custody of a child under the age of 18.
You must complete the 12-month cohabitation period by December 31 of the year of filing. Under Canadian law, same sex couples and couples of the opposite sex are both treated the same for income tax purposes.
Knowing Your Marital Status
You are required by the CRA to disclose your marital status in order to receive the appropriate benefits.
For instance, the Canada Child Benefit (CCB) is usually awarded to the female partner in a marriage or common-law partnership. If you are in a same sex marriage or common-law partnership, the recipient can be designated.
In order to prevent false claims, the CRA may sometimes ask you to submit proof of your marital status. This is to ensure that there is no abuse of the system regarding the allocation of benefits such as the CCB.
The Benefits of Marriage or Common-Law Relationships
If you are a senior citizen, you are allowed to split your pension income with your spouse in order to reduce taxes. Splitting your pension income with your wife allows you to potentially decrease your taxes owing by dropping you to a lower tax bracket.
For example, if you transfer $5,000 of your income to your spouse and she is in a low tax bracket, this could drop you to a lower tax bracket as well, and enables you to save a significant amount in taxes owed.
Changes in Marital Status
The CRA request that you update your records if there is any change in your marital status as soon as possible, and this must be done by the end of the month following your marriage.
For instance, if you were married on June 8, the CRA needs to be inform by July 31.
This update can be done update your CRA My Account online, or by completing and mailing in form RC65, Change in Marital Status. You can also adopt this same procedure for separations, which the CRA recognize to be living apart from your partner for more than 90 days for reasons pertaining to a breakdown in your relationship.
The CRA does not acknowledge separations for couples who still lives together. You can also see if you can change your visa status while in Canada