What Happens to Your Finances When You Get Married?

It’s a valid question, what happens to your finances from a tax perspective when you get married? This was asked by one of our good clients (we do her bookkeeping), who as you’ve gathered is getting married. It’s an exciting time for her, but we also understand the questions that have come up regarding consolidating financials and paying taxes after she ties the knot.

The general picture is, not a whole lot changes in regards to paying taxes, when a couple gets married. Of course, it’s up to them how much of their financials they consolidate—they may want to keep bank and other accounts, and savings and loans separate, or combine some, such as a mortgage or a joint bank account, or do the extreme and pool and join everything. However, in regards to filing income taxes, everyone must file separately, even couples that have pooled income and savings together.

Our tax system does provide some relief for couples, when one spouse makes little or no income. When married or common-law couples put in their tax claim, they must disclose their partner’s income on their form. As a married or common-law couple for the whole tax year, if you or your spouse makes less than $10,320, the other can lower his or her taxes, or claim back the spouse or common-law partner amount.

Where everyone can save is in RRSP investments, and this is especially true for couples, because one can top-up the other’s contribution. So, the question is, do you want to lower your taxes? The contributions you make to your spouse’s RRSP lower your RRSP deduction limit. However, make sure you don’t over-contribute, because then you won’t be saving, and you’ll be complicating your tax calculations. See the CRA site for how to calculate this information: http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/rrsp-reer/cntrbtng/lmts-eng.html

So, the government will do its once-over on your financials as it always has, to determine your taxes. This doesn’t have to be painful—meaning, if you’re smart about your financials, maximizing your tax-saving and tax-free accounts, and you’re able to keep your records in order (we recommend doing so through bookkeeping services), you both may save on taxes, and not necessarily because one spouse makes much less, but because you’re saving lots and investing it properly.