Anaya Nolan
Whether a common-law marriage is recognised for tax purposes depends on the country and state law. In Canada, common-law partners have access to certain tax benefits, credits, and deductions, and the tax rules are the same for common-law partners and married couples. In the US, common-law marriages are recognised for federal income tax purposes if they are recognised by the state in which the taxpayers reside. For example, in Texas, common-law marriages exist and are recognised for tax purposes, but there is no such thing as common-law divorce.
Characteristics of common-law marriage for tax purposes
| Characteristics | Values |
|---|---|
| Federal recognition | Common-law marriages are recognized for federal income tax purposes if they are recognized by the state in which the taxpayers reside. |
| State recognition | Whether a marriage is recognized for tax purposes depends on state law. Common-law marriages are recognized in some states, including Texas, Georgia (before 1997), Idaho (before 1996), and New Hampshire (for inheritance only). |
| Tax benefits | Common-law partners may have access to certain tax benefits, credits, and deductions due to their relationship status. They can transfer unused tax credits to their partner and claim certain amounts, such as the spousal amount tax credit if they financially supported their partner. |
| Tax liabilities | Common-law partners may be able to reduce their overall tax liability, similar to married couples. They may also be able to split pension income to reduce individual tax liability. |
| Tax filing | In Canada, common-law partners file their own individual tax returns, similar to married couples. In the US, common-law couples may be required to file jointly in certain states, which can impact tax liability. |
| Eligibility for benefits | Common-law status may impact eligibility for certain benefits, such as the GST/HST credit, Canada Child Benefit, and other income-based benefits. |
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What You'll Learn
Common-law marriage recognition by state
In the United States, common-law marriage, also known as sui juris marriage, informal marriage, marriage by habit and repute, or marriage in fact, is a form of irregular marriage that is currently recognised in only seven states and the District of Columbia, with two other states recognising it for limited purposes. The seven states that recognise common-law marriage are Colorado, Iowa, Kansas, Montana, Rhode Island, Oklahoma, and Texas. Utah, South Carolina, New Hampshire, and the District of Columbia have limited recognition of common-law marriage.
Common-law marriages are recognised for federal income tax purposes if they are recognised by the state in which the taxpayers reside. If a couple's relationship meets all the requirements of a common-law marriage while living in a common-law marriage state, their marriage will be recognised for tax purposes even if they later move to a state that does not recognise common-law marriage. For example, common-law marriage in Texas is recognised for tax purposes, and a couple that is common-law married in Texas and moves to California, which does not have common-law marriage, will still have their marriage recognised for tax purposes.
The recognition of common-law marriage varies from state to state. For instance, in Texas, one way to be in a common-law marriage is by signing a document and submitting it. Another way is by "holding yourself out as being married", which can be fulfilled by filing a joint tax return. In Utah, the status of common-law marriage is unclear, with government websites claiming it does not exist, while other legal websites state that "non-matrimonial relationships" may be recognised as marriage within one year of the relationship ending.
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Tax liability and credits
In Canada, common-law partners have access to certain tax benefits, credits, and deductions by nature of their relationship status. They may transfer unused tax credits to their partner to reduce their household tax rate. Common-law partners can also share some of their non-refundable tax credits with their partner to reduce their overall tax liability.
In the US, whether a marriage is recognized for tax purposes depends on state law. Common-law marriages are recognized for federal income tax purposes if they are recognized by the state in which the taxpayers reside. If the taxpayers later move to a state that does not recognize common-law marriages, they are still considered married for federal income tax purposes. However, if the taxpayers begin and maintain their relationship in a state that does not recognize common-law marriages, they will not be considered married.
In Texas, common-law marriages are recognized. Filing a joint tax return can be used as evidence of a common-law marriage. When filing jointly, tax liability becomes "joint and several", meaning each partner is responsible for the taxes in full.
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Tax filing status
In Canada, individuals in a common-law relationship must indicate their relationship status and provide information about their partner (name, Social Insurance Number, net income) on their tax return. Common-law partners have access to certain tax benefits, credits, and deductions, such as the ability to transfer some tax credits from their spouse's return to theirs and claim all or part of certain amounts that their spouse qualifies for. They may also be able to split pension income to reduce their overall tax liability.
In the United States, common-law marriage is recognised for federal income tax purposes if it is recognised by the state in which the taxpayers reside. If the state recognises common-law marriage, taxpayers with a common-law marriage are considered married for tax purposes, even if they later move to a state that does not recognise it. For example, Texas is a state that recognises common-law marriage for tax purposes, and filing a joint tax return is considered an element of being considered married under common law.
In states that do not recognise common-law marriage, individuals who begin and maintain such a relationship will not be considered married for tax purposes. In these cases, individuals are required to file their taxes as single persons.
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Tax benefits and drawbacks
In Canada, individuals in a common-law relationship have access to certain tax benefits, credits, and deductions due to their relationship status. These include post-secondary education credits, the Disability Tax Credit, the age credit, and pension income amounts. Common-law partners may transfer unused tax credits to their partner to reduce their household tax rate. They may also split pension income to reduce their overall tax liability.
However, there are also disadvantages to filing as common-law versus filing as a single person. CRA combines the family income of those in a common-law relationship 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. This means that if one spouse makes significantly more than the other, it can affect their eligibility for these programs.
In the United States, whether a marriage is recognized for tax purposes depends on state law. Common-law marriages are recognized for federal income tax purposes if they are recognized by the state in which the taxpayers reside. If the taxpayers later move to a state that does not recognize common-law marriages, they are still considered married for federal income tax purposes. However, if the taxpayers begin and maintain their relationship in a state that does not recognize common-law marriages, they will not be considered married.
For example, Texas recognizes common-law marriages. If a couple fulfills the requirements of a common-law marriage in Texas and files a joint tax return, they are holding themselves out as married. This means that if they separate, they will need to get a divorce, and they will be jointly and severally liable for their tax liability.
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Common-law marriage definitions
Common-law marriage, also known as non-ceremonial marriage, informal marriage, or marriage by habit and repute, is a marriage that occurs without a marriage license or ceremony. It is a marriage that results from a couple's agreement to consider themselves married, followed by cohabitation. In family law, it is a legal and informal marriage.
Common-law marriage is not recognized in all jurisdictions, but those that do not recognize it will typically respect the validity of such a marriage lawfully entered in a state or country where it is recognized. In the United States, common-law marriage is recognized in seven states and the District of Columbia, while nine other states recognize it with some restrictions. These include Georgia, Idaho, New Hampshire, and Ohio, with certain conditions. For instance, in Texas, one way to be in a common-law marriage is by signing a document and submitting it. The other way is by holding yourself out as married, such as filing a joint tax return.
In Canada, couples in marriage-like relationships may be granted similar rights and responsibilities as married couples, but they are not legally considered married. They may be defined as "unmarried spouses" and treated the same as married spouses for tax purposes.
The requirements for common-law marriage include the intention to be married, cohabitation, and holding themselves out to the public as a married couple. There is no statutory requirement for the length of time a couple needs to live together, but the longer they live together, the stronger their case is for common-law marriage.
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Frequently asked questions
A common-law marriage is a legally recognised marriage between two people who live together for a certain period of time (usually at least 12 months) and hold themselves out as a married couple. The requirements for common-law marriage vary by state and province.
In general, common-law marriages are recognised for tax purposes and offer similar tax benefits to traditional marriages, such as the ability to transfer tax credits and claim certain amounts. However, the specific tax benefits may vary depending on the state or province in which the couple resides.
If you are in a common-law marriage, you must indicate your relationship status and provide information about your partner on your tax return. You will still need to file separate tax returns, but you may be able to file jointly depending on the state or province. It is important to consult with a tax professional to understand the specific requirements and benefits that apply to your situation.
