Being married or living common-law can affect the amount of federal tax you pay on both your income and investments. Here are a few tips to help you understand the how living as a couple can affect your tax profile.
If your spouse or common-law partner has a low income (below roughly $10,500 in 2011), you may be eligible for a non-refundable tax credit that will reduce the amount of income tax you pay.
For more detailed information, see the Canada Revenue Agency’s page on spousal deductions.
The federal government offers a non-refundable tax credit to individuals who donate to registered charities. If you and your partner together donate more than $200 per year to registered charities, you can get a larger tax credit by pooling your donations. To do this, one partner claims all the couple’s donations on his or her income tax return.
For more detailed information, see the Canada Revenue Agency’s page on charitable giving.
It is often smart for the partner with the lower income to claim all of the couple’s medical expenses on his or her tax return. This is because the federal government offers a non-refundable tax credit for expenses that are above a percentage (3% in 2011) of one partner’s net income.
For more information, see the Canada Revenue Agency’s page on medical expenses.
If you or your spouse or common-law partner spend money on child care, it may be possible to deduct some of those expenses from your income when filing your federal income tax return. Generally, the person with the lower income must claim child care expenses. These rules, along with information regarding how much you are able to claim, can be found on the Canada Revenue Agency’s page on childcare expenses.
The Tax Free Savings Account (TFSA) is a registered savings vehicle that allows your savings to grow tax-free. If your spouse or common-law partner has room left in his or her TFSA, you can to contribute to it. Similarly, the money held in a TFSA can normally be transferred to a spouse or common-law partner upon death.
Spousal RRSPs allow you to contribute to an RRSP that is registered in the name of your spouse or common-law partner. To do this, you must have the contribution room available yourself. For more detailed information, see the Canada Revenue Agency’s page on couples and RRSPs.
You can split your pension income to lower the total income tax that you pay as a couple. For information on eligibility and how to go about it, see the Canada Revenue Agency’s page on pension income splitting.