Cecily Zamora
Common-law marriage, or common-law partnership, is a legal union between two people who live together and are not married. The recognition of common-law relationships varies across different jurisdictions, but they are generally defined by specific criteria, such as the duration of cohabitation and the presence of children. In the context of filing tax returns, common-law couples are often treated similarly to married couples, resulting in changes to tax benefits and credits. It is crucial for individuals in common-law relationships to accurately report their marital status to the relevant authorities to avoid legal and financial repercussions.
| Characteristics | Values |
|---|---|
| Definition of common-law partner | "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 12 continuous 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" |
| Common-law status change | Notify CRA and Revenu Québec of status change by the end of the month following the month it changes |
| Common-law separation | To be considered officially separated, the couple needs to be apart for at least 90 days |
| Common-law tax filing | File individual tax returns and mark common-law status |
| Common-law tax credits | Ability to transfer some tax credits from spouse's return and claim all or part of certain amounts the spouse qualifies for; combine charitable donations and medical expenses to maximize tax credits; combine pension income to reduce overall tax liability |
| Common-law tax deductions | Childcare expenses are usually claimed by the lower-income partner, but there are conditions in which the higher-income party claims expenses; higher-income partner can contribute to a spousal RRSP to split income |
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What You'll Learn
Common-law status must be claimed to the CRA
In Canada, common-law relationships are on the rise, with nearly one-quarter of couples living in common-law relationships. The CRA considers a couple to be common-law partners if they have lived together for at least 12 continuous months or if they have a child together and live together. It's important to note that the definition of a common-law relationship may vary from province to province.
If you meet the CRA's definition of a common-law couple, you must indicate your relationship status and provide information about your partner (name, Social Insurance Number, net income) on your tax return. Failing to list your common-law status may result in penalties related to benefits you receive that you would not have qualified for if you had disclosed your partnership. By updating the CRA about your change in marital status, you can maximize any claims you're entitled to receive and prevent any incorrect claims that may result in repaying money.
To notify the CRA of your relationship status change, you can do so through your "My Account for Individuals" online, by phone, or by filing form RC65. It's important to remember that when you enter into a common-law relationship, your benefit amounts may change. The CRA will take into account the total earnings of both spouses to determine eligibility for credits and benefits.
Additionally, common-law couples in Canada are not allowed to file joint tax returns. Instead, they must file individual returns and indicate that they are in a partnership. When filing a return for the year of separation, the claim for the common-law partner amount is calculated using the partner's net income before the date of separation.
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Common-law couples must file individual tax returns
In Canada, common-law couples are required to file their taxes individually. This means that each partner submits their own tax return, but the returns are prepared together. While common-law couples cannot file joint tax returns, their marital status impacts their tax situation, and they may be eligible for different credits and benefits than they were as single people.
To be considered common-law partners in Canada, a couple must have lived together in a conjugal relationship for at least 12 consecutive months. If they have a child together, they are considered common-law as soon as they begin living together. It is important to notify the Canada Revenue Agency (CRA) and Revenu Québec of any change in marital status by the end of the month following the change. For example, if a couple gets married in October 2020, they must inform the CRA and Revenu Québec by November 30, 2020.
When filing taxes as a common-law couple, both partners must include information about their spouse in the "Information About You" section of their tax return. This includes the spouse's name, social insurance number (SIN), net income, and employment status. Any credits or benefits claimed by the spouse, such as the Canada Child Benefit (CCB) or the Goods and Services Tax/Harmonized Sales Tax (GST/HST) credit, must also be reported.
By filing as a common-law couple, partners can take advantage of certain tax benefits, such as income splitting, combined deductions and credits, and transferable tuition credits. They can also combine their medical expenses and charitable donations to maximize tax credits. However, it is important to note that the spouse with the higher income should maximize deductions to reduce the overall tax burden for the couple.
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Common-law couples are treated the same as married couples
In some jurisdictions, common-law couples are treated the same as married couples in certain contexts, such as taxes and financial claims. For example, in Canada, while common-law couples are not legally considered married, they may be granted many of the rights and responsibilities of a marriage and be treated as such for tax purposes. This means that common-law couples in Canada must notify the CRA and Revenu Québec of their change in marital status and may experience changes in their benefit amounts and tax credits.
In the United States, common-law marriage has existed since the colonial era, and in states that recognize it, common-law couples may have the same rights as married couples who went through a formal marriage process. A common-law marriage is generally established when a couple lives together for a period of time, holds themselves out to their community as married, and has the legal right to marry. While the length of time required for cohabitation varies, longer periods strengthen the case for a common-law marriage.
In the United Kingdom, however, a 2008 poll showed that 51% of respondents incorrectly believed that cohabitants had the same rights as married couples. While common-law marriage does not exist in Scotland, there was previously a form of irregular marriage called 'marriage by cohabitation with habit and repute' that applied to couples in special circumstances until 2006. In Ireland, common-law marriage is not recognized, but the Civil Partnership and Certain Rights and Obligations of Cohabitants Act 2010 (in force between 2010 and 2015) granted some rights to unmarried cohabitants.
While the recognition of common-law marriage varies across jurisdictions, it is important to note that common-law couples may face similar legal implications as married couples in certain areas, particularly regarding taxes and financial matters. To ensure they are aware of their rights and responsibilities, common-law couples should educate themselves on the legal implications of their status in their respective jurisdictions.
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Common-law status impacts tax credits and benefits
In Canada, common-law relationships are treated the same as marriages for tax purposes. Common-law couples are eligible for similar tax benefits as married couples, such as the spousal tax credit, pension splitting, and contributing to a partner's RRSP. However, there may be differences in the specific credits and deductions available, and common-law partners do not file joint tax returns. Each partner must file their own tax return, indicating their marital status and providing information about their spouse, including name, social insurance number, and net income.
One significant impact of common-law status on tax credits and benefits is the change in eligibility for certain credits and benefits based on household income. For example, benefits such as the GST/HST credit, Canada Child Benefit, and eligible dependent credit may be reduced or no longer available. This is because the CRA combines the household income of both spouses when determining eligibility for these benefits.
Another impact of common-law status is the ability to transfer and share certain tax credits and deductions with your spouse. For example, medical expenses, charitable donations, and tuition credits can be combined or transferred to maximize tax credits. Childcare expenses can also be deducted from income, but they must generally be claimed by the spouse with the lower income.
It is important to note that the rules for common-law status vary slightly across different provinces in Canada. For example, in British Columbia, the CRA recognizes common-law partners who meet certain criteria as equivalent to married couples for tax purposes, providing access to specific tax benefits, credits, and deductions. Additionally, brief separations of less than 90 days are still considered common-law for tax purposes in this province.
Finally, failing to disclose your common-law status and providing incorrect information on your tax return can have consequences. The CRA may request proof of marital or living status and financial dependencies. If it is determined that an individual has misrepresented their status, it is considered tax fraud, and there may be penalties and interest charged on overpayments that need to be paid back. Therefore, it is crucial to keep the CRA up-to-date on any changes in your marital status to maximize eligible claims and avoid incorrect claims.
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Common-law couples must be separated for 90 days
In Canada, common-law couples are defined as those who have lived together in an official, legal union without being legally married. This means that they have lived together for at least 12 months in a row or have a child together.
When common-law couples break up, they must settle several important issues, such as those involving their children, money, and property. Unlike married couples, common-law couples do not need a court decision to make their separation official. They can settle all the issues arising from the separation without going to court. However, it is recommended to seek legal advice or the help of a family mediator to ensure that their rights are respected.
One important aspect of the separation process for common-law couples is the requirement to be separated for at least 90 days to be considered officially dissolved by the Canada Revenue Agency (CRA) and Revenu Québec. This 90-day period is crucial for tax purposes, as it impacts the benefits and credits that can be claimed on tax returns. During this time, common-law couples must inform the CRA and Revenu Québec of their change in marital status by the end of the month following the change.
In the year of separation, the claim for the spouse or common-law partner amount is calculated using the partner's net income before the date of separation, rather than the entire year. This can impact the Canada Child Benefit (CCB) and GST/HST payment amounts received. Additionally, any pension income splitting should also be addressed during this period.
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Frequently asked questions
A common-law relationship is defined as a couple living in a conjugal relationship who are not married but have shared a residence for 12 continuous months. If the couple has a child together, then they are considered common law as soon as they begin living together.
Common-law couples are treated the same as married couples for tax purposes. Common-law couples in Canada are not allowed to file a joint return; instead, they each file single returns and mark that they’re in a partnership. Being in a common-law relationship may impact your eligibility for certain tax credits and deductions.
You must notify the CRA of your change in marital status by the end of the month following the month it changes. This can be done online, over the phone, or by mailing in a form. You must also indicate your relationship status on your tax return.
