Published: March 10, 2020
Last Updated: October 21, 2022
Common Law Marriage for Tax Purposes – A Toronto Tax Lawyer Guide
CRA monitors your bedroom! A common law marriage is an informal relationship that does not require the legal form of a statutory marriage. Furthermore, a common law marriage relationship is a matter of fact which is determined by analyzing the partners’ situation and applying various factors. That means that a common law marriage relationship may exist even without the knowledge of the partners in question. A common law marriage relationship brings with it some of the rights and responsibilities of a statutory marriage, though the specifics vary by province. For the purposes of the Canadian Income Tax Act, common law partners are treated the same as marriage couples. Prior to 2001 there was an extended definition of spouse to include opposite-sex common law couples but the same-sex partners bill in 2000 removed that definition and added the definition of common law partner to encompass both same-sex and opposite-sex couples and the Income Tax Act has since ceased to differentiate between same-sex and opposite-sex couples.
Common Law Partner Definition
In order to qualify as common law partners for tax purposes, a Canadian taxpayer has to be cohabiting in a conjugal relationship with another person. Additionally, they must have been cohabiting throughout the last 12 months or both be the parents of the same child. Meaning, a cohabiting couple in a conjugal relationship with a child together automatically qualify as common law partners regardless of how long they have cohabited. On the other hand, a cohabiting couple in a conjugal relationship without children together must have been cohabiting for the last 12 months before they gain common law partnership status. To be clear, cohabiting together for the last 12 months does not mean that the two people have to live together everyday. Once it is determined that a couple have begun cohabiting in a conjugal relationship, they are considered to be cohabiting in a conjugal relationship for everyday after that regardless of their actual circumstances unless they live separate and apart for at least 90 continuous days because of a breakdown of their conjugal relationship.
Conjugal Relationship Factors
There is no bright line test for whether or not a conjugal relationship exists. Rather, the Supreme Court of Canada in M v. H has adopted 7 key characteristics in identifying a conjugal relationship; 1) shelter; 2) sexual and personal behaviour; 3) services; 4) social; 5) societal; 6) support; and 7) children. For the shelter factor, where the parties lived under the same roof, slept in the same room or bed, and had no/fewer roommates, the relationship leans towards being conjugal. For sexual and personal behaviour, where the parties have sexual relations with each other, maintain fidelity to each other, discuss their problems with each other, share their meals together, assist each other with problems and during illness, and buy gifts for each other on special occasions, that points towards a conjugal relationship. For services, the conduct and habits of the parties are contemplated in relation to meal preparation, washing and cleaning clothes, shopping, household maintenance, and other domestic services – the more these are done communally, the more likely a conjugal relationship exists. For the social factor, where the parties participate together in community activities, treat each other’s family members as a couple would and are treated by each other’s family as part of the family, the relationship leans towards conjugal. The societal factor looks at the community’s attitude and conduct and towards the parties and whether they treat them as if they were a couple. The support factor looks at the financial relations between the parties and whether they share finances for the necessities of life such as shelter, clothing, and food, and what their arrangements are for the acquisition and ownership of property, with the greater the degree of sharing and intermingling of finances, the more conjugal the relationship. The final factor, children, looks at the parties’ attitude and conduct concerning children, where having or contemplating children in the future positively impact the conjugal nature of the relationship. Learn more about how these factors apply to your individual situation by speaking to our top Toronto tax firm and get advice that you can rely on.
Tax Planning Tips – Common Law Relationship
Being in a common law relationship versus being single has varied tax implications, both beneficial and negative. It can be beneficial to be common law partners because this can allow a working partner to claim a non-working partner as a dependent which results in additional tax credits. On the other hand, common law partners can only have one principal residence exemption between the two of them, which two individuals would be able to each have claim to their own principal residence exemption, which has a significant effect when it comes to selling a property. However, it is important to note that the existence of a common law relationship is a matter of fact rather than a choice for the involved parties. That is to say, whether or not the parties think they are in a common law relationship may be a factor, but it is not determinative and ultimately the courts can determine that two people are a couple or not a couple based on the court’s view of the 7 factors. As such, it is important to be aware of the key factors and when in doubt, call one of our experienced Toronto tax lawyers and make sure your relationship status is correct.
"This article provides information of a general nature only. It is only current at the posting date. It is not updated and it may no longer be current. It does not provide legal advice nor can it or should it be relied upon. All tax situations are specific to their facts and will differ from the situations in the articles. If you have specific legal questions you should consult a lawyer."