Saying "I do" has an impact on almost every aspect of your life including your tax return. If you've recently tied the knot or plan to in the near future, here are the answers to common newlywed tax questions.
Do we file just one joint return now?
This is a very common misconception among newlyweds. There is no special "joint return" for couples. CRA still views you as individual taxpayers. Each spouse still files his/her own return annually.
This also means that your bottom line is kept separate. CRA will not offset your balance owing with your spouse's refund. If you owe $1,000 and your spouse is receiving a refund of $1,000, you're still required to remit your $1,000 (and your spouse will receive a $1,000 refund).
Thankfully, both returns don't have to be filed at the same time so you can offset the amounts within your household budget by filing the refund return a couple of weeks before the owing return. This allows enough time to receive the refund for one spouse before remitting the balance due for the other.
Can I give my spouse some of my credits?
Absolutely! You are entitled to transfer a number of credits to your spouse, as long as you don't need them, first. If your spouse doesn't use the full amount of any of these credits:
• Age amount
• Tuition, education and textbook amounts
• Disability amount
• Pension income amount
You can transfer the unused portion to your own return. For example, if you are a post-secondary student with a fairly low income, you may not use all of your tuition and education credits this year. If you have leftover credits, you can choose to either bank them or transfer them to your spouse.
Depending on your situation, this could mean that your spouse could receive up to $5,000 worth of credits to lower his or her tax bill.
What does 'pooling expenses' mean?
As a couple, you may now combine or "pool" certain expenses and have one spouse claim the total. Pooled credits include:
• Medical expenses for yourself, your spouse and your (or your spouse's or common-law partner's) children born in 1998 or later
• Medical expenses for other dependants you support such as your parents or grandparents
• Charitable donations
It's almost always more beneficial to have one spouse claim these expenses, especially in the case of charitable donations. The first $200 worth of donations is worth 15 per cent -- anything over $200 is worth 29 per cent.
If you each donated $200 to charity, your $400 total results in a higher credit for one spouse than two separate claims of $200.
If it's more beneficial, can I still file as single?
In many cases, tying the knot translates to a lower refund, especially if you were a single parent prior to the nuptials. Along with losing the large credit for an eligible dependant at tax time, adding your spouse's income may push your overall family income past certain limits for other benefits including the Canada Child Tax Benefit and the GST/HST quarterly benefit.
If you're used to receiving a good-sized tax refund, it can be tempting to file as single or simply leave out your spouse's income. Not a good idea! It's illegal to submit false information on your tax return. CRA will eventually discover the discrepancy and not only will you be forced to return that ill-gotten refund, you'll be subject to interest and penalties.
Navigating your way through your first year as a couple can be challenging, but doing your taxes doesn't have to be. Prepare both your returns simultaneously with TurboTax.
Our Standard, Home & Business, and Premier versions make transferring credits a breeze. And with built-in optimizers for donations and medical expenses, you and your spouse can easily maximize all of your credits and deductions.
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