While a trip to an accountant might not sound like the most romantic date, it could lead to a big reward down the road.
Married couples as well as common-law partners can take advantage of several income tax benefits, as long as you know how to work the numbers.
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In the eyes of the Canada Revenue Agency (CRA), a couple is considered common law: after living together for 12 months; after becoming parents to a child by birth or adoption; if one partner takes custody and control of the other person’s child. (Couples must inform the CRA of their marital status change by filling out form RC65.)
Couples do not file joint tax returns in Canada — each person files individually. But that doesn’t mean they need be totally separate.
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“I always like to think of it as an X. You start out as individuals, you bring the tax returns together for the purpose of claiming your credits and any deductions, and then they’re separated again at the end,” said Caroline Battista, senior tax analyst at H&R Block Canada.
Do your taxes together, or at least at the same time
Doing your taxes at the same time can streamline the process.
“You can then maximize any of those credits or deductions if you can see the whole picture at the same time,” Battista says.
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If you don’t file at the same time, the one partner who has already filed may need to adjust their return, so it’s doable but it’s a headache.
For some benefits both partners need to file their taxes, such as the child tax benefit or GST credit, in order for those benefits to not be delayed. Staying up to date on your taxes can also help when applying for a loan, such as a mortgage.
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Some credits can be combined, such as medical expenses, charitable donations and transit passes, and claimed on one individual’s tax return where it will make the best financial impact.
With medical expenses, for example, you need to claim more than $2,208 or three per cent of your net income (whichever is less) for it to have an impact on your taxes. You might not spend that on your own, but combining your medical expenses with your partner’s can push it over that minimum threshold.
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“If you group all your medical expenses together you’re going to have bigger bang for your buck than if every person did it individually,” says Robin Taub, a chartered professional accountant and tax expert and TurboTax spokesperson.
With charitable donations, the credit increases with the amount donated.
“If you combine them on one person’s return… more will be deducted,” says Taub.
Keep in mind there are few hard and fast rules as far as on whose tax return to claim each credit, and that can change year-by-year.
“Always check that the lower income spouse actually needs any more credit,” Battista says.
“If they’re a non-refundable credit, they only go against taxes that you owe. So sometimes it is more beneficial to put them on the higher-income spouse’s return.”
The home buyer’s amount can also be split or claimed entirely by one person. The $5,000 credit applies to new homeowners in the year they buy their first home.
If one person doesn’t need all of their credits, such as the disability amount, the pension income amount and the age amount, they can transfer them to their partner.
Tuition, education and textbook amounts up to a maximum of $5,000 can be transferred between partners.
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Couples with at least one child under the age of 18 should look into the Family Tax Cut.
“You can save up to $2,000 in taxes, which is actually quite a lot,” said Taub.
Taub says using an online tax software program will figure out for you where the transfers should go.
“It will search all the deductions and credits… optimizing where those claims go, which taxpayer can take advantage of them.”
Don’t assume there won’t be savings
Moving things around a little can be beneficial even if you and your partner don’t pull in wildly different incomes.
“Don’t just assume because your neighbour didn’t get it that you won’t as well,” says Battista.
And little bits can add up.
“If $100 was lying on the ground would you step over it?” says Battista. “It pays to look into anything that would be available.”