Marriage changes your life for the better- you’ve undoubtedly heard that. But do you know it can change your financial situation too? Marriage has a significant impact on your tax if you are married in Canada. I am sure many questions have arrived, such as do married couples have to file taxes together in Canada? Is my tax rate going to be reduced?
No, marriage doesn’t reduce the tax amount, but it increases the benefits and additional advantages. However, there are some disadvantages too. But let’s not focus on the negatives and see what positive news we have to offer.
Tax Benefits of Marriage Canada: 8 Advantages You May Not Know
A joint tax return can make a balance in amount.
Suppose you and your partner both earn different amounts. One has a higher salary than the other. In such a case, if you file jointly, the tax amount will be the average of both spouse’s wages. The lower income tax bracket will bring the high tax bracket about half lower. It results in much lower taxes than they would if they file separately.
You can get a Tax deduction for spouse losses.
If you or your spouse faces any loss, you will be able to get a tax deduction. This deduction can help you a little to overcome the dire situation. The loss can be a massive fall in business, losing a job, or any unwanted accidents. However, losing money is never a wise thing to reduce tax.
Your unemployed spouse has Retirement Savings Benefits.
In this case, there is a much higher cap on the income level when taking advantage of the individual retirement account (IRA). The benefits are better for married couples than for a single person. If your spouse is unemployed and unable to save for retirement, you can help him/her. You can fund one single account for both. It will save a considerable amount of money.
You can transfer your benefits to your partner.
Another fantastic advantage you will get is the ability to transfer your benefits. If you don’t need your non-refundable credit, transfer them to your spouse or partner. It will reduce your liability. However, not all non-refundable credits are transferrable. There are a few such as:
- Tuition amount
- Age amount
- Caregiver amount (under 18)
- Pension amount
- Disability amount etc.
You can save a lot of time on filing taxes.
It takes less time to file taxes jointly than filling for two separate people. That is because there is only one file to do. It’s simple as that.
You will get a higher charitable contribution deduction.
Every taxpayer has a limit to deduction from charitable contributions. If you file jointly, the limit widens. For example, suppose one spouse makes a substantial donation, but he/she doesn’t have a minimum income of double the amount. Then they will deduct the excess contributions the following year.
You can protect your asset under your spouse’s authority.
If you are not married and gift your partner something expensive, you must file for tax returns on gifts. But not when you married. You can gift your spouse anything without giving tax.
Because of this law, you can give your spouse any asset or property, or money without paying taxes. This process will help to keep the deceased spouse’s property safe.
You can choose suitable benefits packages.
Married couples can choose the benefit packages according to their preference. They have the right to select a combination that will suit their married life.
Bonus advantage: the bond of your married life will be stronger.
While this might not be a financial advantage, it is an important one. When you and your spouse file for taxes jointly, you sit down together to discuss. None of you may be a finance expert. But you can help each other understanding the process. It will not only make the tedious process enjoyable but also strengthen your bond.
Tax benefits of marriage Canada may have its obstacles and downside. For example, if the souses have a similar income level, the tax bracket may rise higher. But then again, you can always file separately. And if that isn’t your case, then why not rubbing together? You have a life together; make your financial decisions together, too.