As more Canadians enter common-law relationships, experts are encouraging young couples to educate themselves on the tax implications.
It’s younger Canadians driving this trend, with almost eight in 10 coupled-up Canadians aged 20 to 24 living with a common-law partner. For tax purposes, common-law and married are the same, said Jami Monte, a CPA and TurboTax spokesperson. For example, you can do pension income splitting, she said. As well, if one spouse earns significantly less, the other may be able to claim them as a dependent. Medical expenses can be allocated to the higher-income partner to help alleviate tax burdens, said Lalonde.
Twelve months goes by quickly, said Ricchio, and it’s not uncommon for someone to realize they’ve been filing as a singleton for a year or more when they were actually common-law. If that happens, it’s not difficult to change your status with the CRA, she said, and you can do it online, over the phone or by mailing in a form.
It can be helpful to work with an accountant or financial planner every few years to make sure you’re not missing any possible benefits or transfers, said Lalonde, especially when you’re making a big life change such as changing your marital status.