2-05: Marital Status
When you move in with your significant other, two clocks start ticking. Whether you know these clocks are ticking doesn’t matter. What’s going to happen when they each get all the way down to zero is going to happen. There isn’t much you can do about it.
So let’s find out together what those clocks are counting down to and what it means for you.
What’s Tax Got To Do With It?
The Canada Revenue Agency is extremely interested in your marital status. In fact, you are required to inform them any time it changes, and the deadline is the month after the change.
That might be an easy requirement to meet if you get married…and if you know you have to do it. The date you get married is the date your marital status changes. Pretty straightforward.
But if you move in together your marital status doesn’t actually change the day you wrestle the couch up the stairs. You have to live together in a “conjugal relationship”; that is, a committed partnership with emotional, social, physical, and financial ties to each other, for twelve months before your marital status actually changes according to the CRA.
Not only do you have to know about the requirement to notify them, you have to remember to do it the month after you’ve lived together for a year.
Well, unless you have kids together. Then you’re common-law right away.
Why do they care so much? Because the CRA is the gatekeeper for every tax credit and most income tested benefits in Canada. The money you get to keep, after tax, or that you receive as a regular deposit to your bank account from the federal, provincial, or municipal government is calculated based on something called your Adjusted Family Net Income, which is the sum of your and your partner’s net income (line 23600 on your tax return or notice of assessment, minus any Universal Child Care Benefits or RDSP income plus any repayments to those same programs).
Move in together, and your Adjusted Family Net Income goes up (most of the time) while your benefits go down. If you’re receiving monthly or quarterly income from the federal, provincial, or municipal government, your benefits are supposed to be adjusted the month after you file.
If, like ten thousand other people, you don’t know about the requirement and don’t think about it until you have to answer the question about marital status on your next tax return, you’re very likely to experience a strongly worded request (demand) to give back any benefits you shouldn’t have gotten based on your new Adjusted Family Net Income. It can be a really nasty shock.
Property Law is a Whole Other Animal
A decent way to understand how the government thinks about common law relationships vs. marriage is that moving in together is mostly–but not always only–about income and getting married is–mostly, but not always only–about property.
Whether or not the CRA considers you to be in a common-law relationship doesn’t matter when it comes to who owns what. The province or territory you live in has its own marital status clock ticking away, and they’re the ones who make most of the rules about when you own things individually or together.
It might not matter much to you right now, at the beginning of your relationship, but it might matter a whole lot in the future, and now is the best time to document it.
If you move in together in Ontario, for example, the province will consider you to be common-law spouses after three years of a conjugal relationship, or as soon as you have a child together.
In Alberta, you are considered to be in an “Adult Interdependent Relationship” after three years of sharing your life, home, and finances with someone you’re emotionally committed to…or as soon as you have a child together.
In BC, you’re considered common-law spouses once you’ve lived together in a marriage-like relationship for two years…or–you guessed it–once you have a child together.
Becoming common law spouses in most parts of Canada doesn’t automatically entitle you to each other’s property or income if one of you dies without a will, or if you split up in the future. Knowing when your marital status changed and what you each brought into the relationship helps untangle the knot of ownership after the relationship ends.
Resources
Are You Common-Law in BC? Rights, Property & Support