Is the institution of marriage under attack in Canada? Social conservatives and various think-tanks believe so, and their fears about the state of the nuclear family are seemingly backed by recently published statistics:
- The Vanier Institute recently reported that cohabitation has risen sharply over the past few decades. 57% of first unions during 1990-1995 were common law (unmarried cohabitation), compared with just 17% during 1970-1974.
- Another study from the Vanier Institute notes that divorce rates have risen from 36 per 100,000 people in 1961 to 224 per 100,000 in 2003
- Statistics Canada’s 2006 census reports that the proportion of single-parent families where the lone parent was never legally married has risen sharply, from 1.5% in 1951 to 29.5% in 2006.
Such statistics are often cast as purely social issues, and conservative voices have frequently cited Canada’s deviation from so-called traditional values as the cause of the aforementioned statistics. Detractors charge that those worried about the state of marriage –whom tend to be older and more religious- are simply unwilling to keep up with the times.
Outside of the explosive social issues, there are still many who maintain that the Canadian Government is waging an inadvertent economic war against married couples through its taxation policies. The belief is that Canadian tax policies favour single people and couples with no legal binding over married couples or common-law couples.
Listed below is a sample of some of the more common tax-saving measures, with an evaluation of whether they are more beneficial to married/common-law couples or two people living as “roommatesâ€. Which spousal configuration can lead to the greatest tax savings?
Disclaimer
This is not professional advice and should not be used in lieu of professional advice. Sources are as follows:
- Taxtips.ca – Canadian Tax and Financial Information
- Revenue Canada Agency
Quoted figures are based on 2007 taxation regulations.
Personal Amount
Each person can claim $1,384 as a basic amount against the tax payable. The amount can be claimed for a spouse provided (s)he has a maximum net income of $8,929. No direct equivalent exists for roommates, even if one of the roommates is not working.
Advantage: Marriage / Common-Law
Eligible Dependent
“Roommates†can claim a parent or grandparent as a dependent, whether by blood or though marriage / common-law / adoption. Of course, the “dependent†must be either disabled or underage. The value of the claim is reduced when the dependent’s income reaches $5,702 and eliminated outright at $9,721. Married and common-law couples are prohibited from making spousal claims, while other dependents can be claimed only if the spouse was not in the house and not providing/receiving support from the claimant. Only one claim per household can be made, even if there are multiple dependents.
Advantage: Roommates
GST / HST Credit
Married and common-law couples are only permitted to submit one GST/HST application per household. To receive the credit, the submitter must include his/her spouse’s net income (even it if is zero) and SIN to receive the credit. If you separate from your spouse, you can receive a separate GST/HST credit, provided you are apart for at least 90 consecutive day. A couple living as roommates can each apply for the GST/HST Credit.
Advantage: Roommates
School / Tuition / Schoolbooks
If you do not have enough income to use your own credits, you can either carry those credits forward to a future year or transfer them to your spouse. You cannot transfer credits to your spouse once they have been carried forward. School-related credits can be transferred to a parent, but unfortunately not a room-mate.
Advantage: Marriage / Common-Law
RRSP
RRSP’s are the most population tax shield and thus deserve mention. Anyone with an earned income can contribute to an RRSP, up to the age of 71. The approximate RRSP claim limit is 18% of the previous years income less pension adjustments, profit sharing plan adjustments and past service adjustments. Limitations may be increased by past service adjustment reversals and unused deductions carried forward. Spousal RRSP contributions can also be made, subject to the same limitations. Roommates obviously don’t have the advantage of making spousal contributions, but real bias may be in what constitutes earned income. Stay-at-home parents do not qualify to make RRSP contributions, which has caused some controversy.
Advantage: Marriage / Common-Law
Final Thoughts:
The largest taxation gap seems to be between couples where both members are working vs. couples with one stay-at-home parent. Housewives (or husbands) –with no recognized earned income- cannot contribute to RRSP’s or have contributions made, cannot immediately use school credits to their own advantage and cannot be credited as eligible dependents. Additonal, an all-round cut in tax rate and across-the-board income splitting would help all types of families … but that’s another topic.
Being a newlywed, I haven’t been able to experience all the nuances of taxation while married. If you have any experiences of your own to share, feel free to leave a comment below.
Other Viewpoints:
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Some people may also hesitate to get married because they fear that if the marriage breaks down, they owe half of what they own to their ex-spouse no matter what the situation. I talk about that in my essay on cohabitation. Taxation may be another factor deterring some people from marriage. But then of course society is getting more liberal. Marriage is no longer a prerequisite for having regular “licit” sexual relations or for having children. So I think the so-called decline of marriage is due to a number of factors.
There is an article in this month’s Ms Magazine about why some people are preferring to live common-law rather than marry. It’s from an American rather than Canadian perspective, but you may find it interesting.
well when you consider that the government gives better tax brakes to married couples when it comes to home, real estate purchasing and insurance, better health coverage and overall workers rights to married couples, there is very little your post says that isnt counter balanced by other perks.