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Taxing Canadian Twosomes
Couples for tax purposes
Spouses and common-law partners are treated the same way for Canadian income tax purposes.

Spouses are individuals who are legally married. A common-law partnership exists when two individuals have been living together in a conjugal relationship for at least 12 months. Parents of the same child are considered to be common-law partners if they have been living together in a conjugal relationship for any period of time. Common-law partners may be of the same or opposite sex.

How is income split?
It's important to know the rules on taxing couples.

The child tax benefit and the GST/HST credit are calculated based on family income, while federal and provincial taxes are calculated on an individual basis. Therefore, two couples with the same total family income will get identical child tax benefits and GST/HST credits, but may have to pay different amounts of income tax.

There can be a significant difference in the total tax burden depending on the distribution of that income between the individuals.

Get tax advice
Surely, this is inappropriate for a system that is supposed to levy tax based on the ability to pay.

Taxing common-law and married couples in the same way was introduced in 1993. Treating same-sex couples on the same footing as heterosexual couples began in 2001. Both are important steps toward improving tax fairness, but took many years to develop. Let's hope the next step, the removal of inconsistencies in the taxation of couples, will be addressed soon.

“What wise men do in the beginning, fools do in the end.”

Raymond E. Jackson Retired

Simon J. Jackson, CFP, CPCA Senior Financial Advisor, Manulife Securities Incorporated Life Insurance Advisor, Manulife Securities Insurance Inc.