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Canadian Tax and
Financial Information
Filing With a Spouse

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Filing Your Return
Personal Income Tax -> Income Splitting

Should my spouse and I file our tax returns together, or separately?

Spousal tax returns are always filed separately - that is, the tax returns are prepared separately.  However, when tax returns are prepared using personal income tax return software, most software will give the option of "coupling" the preparation of both returns.  The returns are still printed and filed separately, but the software will usually highlight ways in which taxes may be reduced.

You are required to report what your marital status was as of December 31st of the tax year.  This is done by ticking the appropriate box on page 1 of the tax return.  The boxes include:

  1. Married

  2. Living Common-law

  3. Widowed

  4. Divorced

  5. Separated

  6. Single

You are married or living common-law as long as you and your spouse are not living separate and apart from each other on December 31st because of a breakdown of the marriage or common-law relationship.  If you are living apart from each other due to some other reason, you would still be considered married or living common-law.

You must report the name, social insurance number and net income of your spouse or common-law partner on page 1 of your tax return, in order to claim some tax credits.

The combined income of you and your spouse or common-law partner is used to calculate:

bullet

GST/HST credit

bullet

Canada child tax benefit (CCTB)

bullet

Guaranteed Income Supplement (GIS)

bullet

working income tax benefit

bullet

refundable medical expense supplement

bullet

provincial low income tax reductions and some tax credits - see the information for your province

bullet

BC Medical Services Plan (MSP) premiums

 

Claiming tax credits and deductions with a spouse

If one spouse is unemployed or has very low earnings, the other spouse can claim a spousal tax credit.  See the tables of non-refundable personal tax credits for the federal and provincial territorial amounts of the spousal tax credit.

There are some tax credit amounts which can be combined and claimed on either spouse's return:

Medical expenses - expenses for both spouses should be combined and claimed on the tax return of one spouse.  It is often better to claim all medical expenses for both spouses on the return of the spouse with the lowest taxable income.

Donations for both spouses should be combined and claimed on the tax return of one spouse, because the tax credit for the first $200 of donations is at the lowest tax rate.

Some tax credits can be claimed by either spouse, or apportioned between spouses:

bullet line 306 amount for infirm dependants age 18 or older
bullet line 364 public transit amount
bullet line 365 children's fitness amount
bullet line 370 children's arts amount
bullet line 369 home buyers' amount
bullet line 313 adoption expenses
bullet line 314 caregiver amount

The deduction (not tax credit) for child care expenses must generally be claimed on the tax return of the spouse with the lowest net income.

If one spouse (or common law partner) cannot use all of the following tax credits, they can be transferred to the other spouse by completing Schedule 2 of the tax return:

  1. line 301 age amount
  2. line 367 amount for children under 18
  3. line 316 disability amount
  4. line 314 pension income amount
  5. line 323 tuition and education amounts (these can also be transferred to a parent or grandparent

See also - links to all information on TaxTips.ca related to persons with disabilities.

 

Transfer of income from taxable Canadian dividends to a spouse

Other investment income earned in a joint account

When investments are held in a joint account, the investment income (including capital gains) should be reported based on the funds contributed to the account by each spouse.  If the funds were provided equally by both spouses, then the investment income would be split equally.  This subject is covered in the Canada Revenue Agency (CRA) web page Line 121 - Interest and other investment income, under the topic of Bank accounts.

In order for the lower income spouse to be able to claim more investment income, finances should be arranged so that the lower income spouse has money to invest.

See our article on Income Splitting on the Personal Tax page, which also includes information on Pension Income Splitting.

 

 

Tax Tip:  Try to arrange your finances so that both spouses have equal income before and after retirement.

 

Revised: December 21, 2013

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