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What are the tax rules for common law partners
With common-law relationships on the rise in Canada, here’s what you need to know about tax rules for filing your tax return as a common-law partnership.
What is common-law marriage in Canada?
The Government of Canada defines common-law marriage as living in a conjugal relationship with a person who is not your married spouse. In addition, at least one of the following conditions applies:
the person has been living with you in a conjugal relationship for at least 12 continuous months
the person is the parent of your child by birth or adoption
the person has custody and control of your child (or had custody and control immediately before the child turned 19 years of age) and your child is wholly dependent on them for support
Note that what’s defined as a common-law relationship varies from province to province, but for the purpose of this article, we’ll use the common-law definition listed under the federal Income Tax Act.
Married vs. common-law: Are there any differences at tax time?
No; if you meet the definition of a common-law couple then the CRA considers you married for tax purposes. The key factors are: how long you’ve lived together and whether you have children together.
Canadians file their own individual tax returns. If you’re living with a partner and do not meet the CRA’s definition of common-law, simply continue to file your tax return as a single person. But if you meet the definition of common-law marriage, you must indicate your relationship status and information about your partner (name, Social Insurance Number, net income) on your tax return.
What are the pros and cons of filing taxes as common-law partners?
As with married couples, common-law partners will have access to certain tax benefits, credits and deductions by nature of their relationship status. That means that you’ll be permitted to claim both the federal and provincial spousal amount tax credit if you supported your partner financially during the year
contribute to a spousal RRSP
combine medical receipts and charitable donations
Common-law partners may also transfer unused tax credits to their partner to reduce their household tax rate. These include post-secondary education credits, the Disability Tax Credit, the age credit (for those 65 years and older), and pension income amounts.
There are disadvantages to filing as common-law versus filing as a single person. The most obvious example is that CRA combines your family income to determine eligibility for benefits such as the GST/HST credit, the Canada Child Benefit, the eligible dependent credit and the Guaranteed Income Supplement and Allowance.
What happens if I separate from my common-law partner?
According to the federal definition of common-law marriage, you are still considered to be common-law even if you were separated for less than 90 days (within a period of 12 consecutive months) because of a breakdown in the relationship.
Only when you’ve been living apart for 90 days are you considered to be separated. Note that once the 90-day separation threshold has been reached, the “effective” date of your separated status begins the day you started living apart.
You should then notify the CRA of your relationship status through My Account for Individuals online. This may impact your benefits due or payments owed.