Thursday, April 27, 2006

One last tax question — I promise

I live with my girlfriend. After as little as six months in some jurisdictions, that makes us common-law spouses in the eyes of the law. I'm already covered under her company's generous benefits plan, but for my own purposes at the moment, I'm trying to get a clearer picture of the tax implications of our arrangement.

I've been under the impression that marriage (or at least, common-law living) had its fair share of financial advantages. We're a long way away from things like spousal RRSPs, but there's a part of the Ontario tax credits section which allows for pooled income. I'm no tax expert - that much should be obvious by now - but I think, since we've decided to file as common-law this year, that it's going to end up costing us (me, at least) money.

Essentially, what seems to have happened is that instead of being taxed as one low-income earner (me, as I was a student for part of last year) and one middle-income earner (her) we're taxed as a single middle-income unit. It makes no difference on her return, but on mine, it seems as though I'm punished for having a well-off "spouse" to the tune of a rebate that's $200 less.

Does that seem plausible? I've always laboured under the assumption that the governement "wants" you to get hitched, buy a house, fill it with stuff and buy insurance to protect it. But unless I've crunched the numbers wrong, it seems I'm going to get back $200 less than I'd otherwise be entitled to because I' decided to shack up with a woman who makes more than me.

If that's the case, would it be "illegal" for us to file as individuals? Something doesn't add up here.

1 comment:

FourPillars said...

Just going through your archives.

As far as I know there is basically no such thing as having a household income. My wife is currently not working and I got a big credit because of that only because she was a dependant.

Mike