So, you got married very recently. Best wishes for your journey ahead. What’s next? Like it or not, you have to file taxes to get the tax benefits of being married. Do married couples have to file taxes together in Canada Of course! As a responsible Canadian citizen, you need to pay taxes on time. Every married couple can file taxes either separately or jointly.
- Filing joint taxes means you file a single return, including the income and deductions for both.
- Filing separate taxes means you and your partner file separate returns by keeping incomes and deductions separate.
The IRS urges married couples to file joint tax returns, but they don’t force them to do so. Filing taxes jointly can be more tax beneficial; at the same time, it also comes with negative results.
In some circumstances, it is better to submit separate returns for your financial situation. Whichever suits your case, the important thing is to know when to file taxes together.
There are some circumstances when filing together can be beneficial for both. Let's talk about them in detail.
When Do You Need to File Taxes Together
Married couples have a choice to file taxes jointly or separately. However, which option is right for you and your partner? Well, it depends on both your financial and marital status.
You can decide to file taxes together if you were married by December 31 of the tax year. It means if you got married on or before December 31, 2020, you could file a joint 2020 return in 2021.
Filing together does not mean only have the option to file jointly. However, you can still file separately but prepare and file your taxes at the same time. In fact, it is the best option to get the most out of tax credits and deductions.
Also, processing your file together will simplify the process. You can avoid delays in payments and valuations. Jointly or separately – which one to proceed with? Keep reading.
When to File Separately
Filing separate taxes provides couples of relief from joint liabilities. Each of them is responsible for their own individual tax return. However, filing taxes separately bring a few tax considerations.
It may provide a higher tax with a higher tax rate. But, the standard deduction for separate returns is lower than joint filers. There are situations when filing separately also brings tax benefits for couples.
- When the incomes of both spouses are the same, they better file taxes separately. But, couples with lower income may need to pay more taxes if the income is not the same.
- When one spouse has lots of medical expenses, filing taxes separately can help get some tax breaks.
- Filing separate taxes may help if your income is used to determine student loan payments.
- When you don’t want to be responsible for your spouse’s tax liabilities, it is better to file taxes separately. It happens when couples are about to be separated or divorced.
- When one spouse suspects that the other is ignoring income or overdoing deductions, filing taxes separately is the best option.
When to File Jointly
Filing taxes jointly means couples fill out one tax return together. The IRS provides one of the largest standard deductions each year who file jointly. It allows them to deduct a significant amount from their income instantly
- Married couples filing jointly to get lower tax rates.
- When you file a joint tax return, you become eligible for certain tax breaks.
- With the joint tax return, married couples have higher income cut-offs. So they can make Roth IRA contributions.
- IRS gives more tax credits to married couples who file jointly than separately. Tax credits include;
- Earned income tax credit
- Adoption credit
- Credit for the disabled and elderly
- Child and dependent care tax credit
- American opportunity credit
- Lifetime opportunity credit for higher education expenses
Separate filing is more complicated as there are certain rules to follow. Also, it takes time to complete the process. If you want to avoid all these, filing taxes jointly is a great idea.
Rules to Follow
According to Canadian tax rules, each spouse must include their marital status on the tax return. If you are married, you must add your partner to your tax return.
The CRA knows about your marital status and other information based on the information you have added. Your marital status has a great impression on your tax return.
In every marriage, there can be differences but make sure you both are sorted with filing taxes. If you have a simple tax profile, it is the best time to file taxes together. But, if you are in between a complicated tax situation, get help from a tax expert right NOW