Region: OntarioAnswer # 0124
Who is considered living common-law for the purpose of filing income tax?
Under the federalIncome Tax Act, common-law couples are treated the same as married couples. The definition ofcommon-law partnerunder theActis:
“A person with whom you live in a conjugal relationship who is not your spouse, and he or she:
- has been living with you at least 12continuous months (includes any period you were separated for less than 90 days because of a breakdown in the relationship); OR
- is the parent of your child by birth or adoption; OR
- 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 that person for support.”
It is important to know that the end of a relationship involves serious legal and financial matters, including tax issues, which must be negotiated and finalised. To get help, call a lawyer now.
How do I file my tax return as a common-law partner?
If you meet the definition of a common-law partner under theAct, you must indicate that you are living in a common-law relationship on your tax return. You and your common-law partner must each file your own tax return with Canada Revenue Agency (CRA). Along with your own personal information, you must include your common-law partner’s name, social insurance number and their net income (even if it is zero) on your return.
The CRA calculatesgovernment benefitsbased on yourhouseholdincome. This means the CRA combines the income for both partners to determine eligibility for certain tax credits and benefit amounts.
Advantages to filing as a common-law partner
Depending on your situation and the type of credit or benefit, there are both advantages and disadvantages to filing your income tax return as a common-law partner.
You may be able to maximize certain tax credits and deductions. For example, you may be able to:
- combine receipts such asmedical expenses and charitable donations to maximize your credits and pay less tax
- claim theFamily Tax Cut (for couples with at least one child under 18),
- contribute to a spousal RRSP
- claim both the federal and provincial (if applicable)spouse or common-law partner amounttax credit if you supported your partner financially and they earned below a certain amount for the year
- claim the entire $5,000 Home Buyers tax credit amount (for new homeowners in the year they buy their first home) yourself or split it with your partner
You may also be able to transfer credits you will not use to your partner, such as:
- Disability Tax Credit,
- Pension income payment amounts,
- Age credit (for people over 65), and
- Credits for post secondary education, such as tuition and textbook credits.
Disadvantages to filing as a common-law partner
While you may be able to maximize certain tax credits and deductions when filing as a common-law partner, you may also lose some tax credits you might have been entitled to when filing as a single person because your combined income makes you ineligible. Or, only one partner will be eligible to receive the benefit.
Credits and benefits that you may lose include:
- the eligible dependant credit, which one or both partners may be claiming if they are raising a child,
- the Guaranteed Income Supplement (GIS) and the Allowance (offered under theOld Age Security program),
- the GST/HST credit, and
- the Canada Child Benefit (CCB).
To be eligible for many tax credits, such as the GST/HST credit and the CCB, you must meet CRA’s low income family eligibility requirements. For more information on filing as a common-law partner and federal child and family benefits, visitcanada.ca. There are also manyprovincial and territorial tax credits and tax deductionsthat are affected when filing as a common-law partner.
How does being separated from my common-law partner affect my taxes?
To be considered officially separated by the CRA, you and your common-law partner need to be apart for at least 90 days. When filing a return for the year you were separated, your claim for the common-law partner amount is calculated using your partner’s net incomebefore the date of separation.
What if you are a common-law partner but do not file your return as livingcommon-law?
If you are living in a common-law relationship, but do not file as such on your income tax return, you may be guilty of filing a fraudulent tax return, and you could face certain consequences. These include:
- being reassessed for unpaid taxes, interest and penalties
- being denied CPP benefits
- being denied other pension survivor benefits
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The end of a relationship involves serious legal and financial matters, including tax issues, which must be negotiated and finalised. To get help, call a lawyer now.
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