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How does living common-law affect income tax?

Region: Ontario Answer # 0124

Who is considered living common-law for the purpose of filing income tax?

Under the federal Income Tax Act, common-law couples are treated the same as married couples. The definition of common-law partner under the Act is:

“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.”

How do I file my tax return as a common-law partner?

If you meet the definition of a common-law partner under the Act, 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 calculates government benefits based on your household income. 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 as medical expenses and charitable donations to maximize your credits and pay less tax
  • claim the Family 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 amount tax 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 the Old 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, visit canada.ca. There are also many provincial and territorial tax credits and tax deductions that 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 income before the date of separation.

What if you are a common-law partner but do not file your return as living common-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

Because filing your tax return as a common-law partner is the same as filing as a married spouse, the tax rules are the same. For more information on filing your tax return as a common-law partner, visit the CRA website at canada.ca.

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