How Marriage Gives You A Raise

Black Wall Street Canada — Mon, 08 Apr 2024 12:08:25 +0000

Two Big Life Moments Will Affect Your Taxes. Here’s How to Maximum Your Deductions

Good news if you’re the sort of person who loves filling out forms and poring over crinkled-up receipts: it’s tax season! And if you’re the sort of person who loathes such tasks, well, we can’t blame you. All the same, with the April 30 filing deadline approaching, we thought we’d share some advice regarding two common-ish life events with major tax implications: 1) getting married or moving in with your significant other, and 2) having a kiddo. And if you got hitched or had a kid prior to 2023, you’d be wise to read on to make sure you’re maximizing your deductions, because not overpaying the government is a sure way to build wealth. You can also check out a longer version of this article, which has pointers for folks who are heading off to university or bought a home. Let’s get to it:

Scenario #1: You’ve Shacked Up With Your Significant Other

The big perk of marriage (besides companionship, etc.) is that you and your partner can share tax credits and benefits. Couples in a common-law relationship can do the same. In either case, you’ll need to update your relationship status with the Canada Revenue Agency (and with Revenu Québec if you live in the province). Why bother? Because cohabiting couples can…

[1] claim the pooled charitable donations and pooled medical expenses amounts on whichever partner’s return will provide optimal savings (probably the higher earner).

[2] transfer unused credits for things like age, Canada caregiver, disability, pension, and tuition amounts. If you haven’t used them and your partner can, you can pass them along. The annual cap is $2,000 for pension transfers and $5,000 for tuition transfers.

[3] split pension income to take advantage of different marginal tax rates and reduce overall income taxes.

[4] claim any remaining credit from one partner’s Basic Personal Amount on the other partner’s return.

Scenario #2: Your Family Got Bigger

Adding a child to your family means less sleep, more stress, and discovering just how much more room there is in your heart than you expected. And tax breaks! A few of the biggies:

PRE-STORK TAX BREAKS

[1] Medical expenses. Ultrasounds, IVF treatments, fertility-related prescriptions, prenatal and postnatal treatments, hospital services — you can claim all sorts of birth-related expenses

[2] Adoption expenses. You can currently claim a federal credit of up to $18,210 in adoption-related expenses, and many provinces offer additional credits, so be sure to check.

POST-STORK TAX BREAKS

[1] Registered Education Savings Plan (RESP). This is a tax-advantaged account to help save for university. The government will match — that’s right, match — 20% of contributions up to $2,500 a year, for a lifetime total of up to $7,200.

[2] Regional grants. If you live in Quebec, félicitations: the provincial government will kick in a match of 10% of your RESP contributions, up to a max of $250. Other provinces, like B.C., offer similar RESP gifts.

[3] Canada Learning Bond (CLB). Children of eligible low-income families can receive a $500 deposit in their RESP from the government the first year it’s opened. Then, every year after that until they turn 15, they’ll get an additional $100, up to a maximum $2,000 benefit.

[4] Canada Child Benefit (CCB). Depending on your income, marital status, and kid’s age, you may qualify for up to $7,437 per child per year in tax-free support. You can apply for this benefit when registering a birth in your province or territory or online through your CRA My Account.

OK! That’s probably all you can stand reading about taxes in one sitting. Good luck!