When Does Common-Law Status Begin?
| Criteria | Timeline |
|---|---|
| Living together in conjugal relationship | 12 continuous months |
| Have a child together (birth or adoption) | Immediately |
| CRA reporting deadline | First tax return after becoming common-law |
“Conjugal relationship” means you live together as a couple, share finances or household responsibilities, and present yourselves as partners.
Tax Implications of Common-Law Status
Benefits
| Benefit | How It Works |
|---|---|
| Spouse tax credit | Claim credit if partner’s income under ~$15,000 |
| Income splitting (pension at 65+) | Transfer up to 50% of eligible pension income |
| Medical expense pooling | Claim all family expenses on one return |
| Charitable donation pooling | Combine donations for larger credits |
| RRSP spousal contributions | Contribute to partner’s RRSP |
| Tax-free asset transfers | Transfer property between partners without triggering gains |
| TFSA successor holder | Designate partner to take over TFSA |
Potential Drawbacks
| Impact | Details |
|---|---|
| GST/HST credit reduced | Based on combined family income |
| CCB reduced | Child benefit calculated on family income |
| OAS clawback combined | Higher combined income = more clawback |
| GIS eligibility reduced | Family income threshold applies |
Common-Law vs Married: Key Differences
| Issue | Married | Common-Law |
|---|---|---|
| Federal taxes | Identical | Identical |
| Property division (ON) | Equal division automatic | No automatic rights (unless cohabitation agreement) |
| Property division (BC) | Equal division automatic | Equal division after 2 years |
| Spousal support | Court can order | Court can order (varies by province) |
| Inheritance (no will) | Spouse inherits | May get nothing (province-dependent) |
| Pension survivor benefits | Spouse eligible | Partner eligible (plan-dependent) |
Protecting Yourself
Cohabitation Agreement
| What It Covers | Why It Matters |
|---|---|
| Property ownership | Clarify who owns what |
| Property division on breakup | Avoid costly disputes |
| Debt responsibility | Protect yourself from partner’s debts |
| Spousal support | Waive or establish expectations |
| Death provisions | Ensure partner is provided for |
Cost: $1,500-3,500 for a lawyer-drafted agreement.
Title and Registration
| Asset | How to Protect |
|---|---|
| Real estate | Joint tenancy or tenants in common (know the difference) |
| Bank accounts | Joint vs separate (consider liability) |
| Investments | TFSA successor vs beneficiary designation |
| Vehicles | Whose name is on registration |
Tax Filing as Common-Law
Required Changes
| Item | Action |
|---|---|
| Marital status | Change to “common-law” on first return |
| Family income | Report combined income for credits/benefits |
| GST/HST credit | Will be recalculated |
| CCB | Will be recalculated based on family income |
| Medical expenses | Can claim for partner |
Optimize Your Taxes
| Strategy | How |
|---|---|
| Claim all medical expenses on lower-income partner | Higher credit due to 3% net income threshold |
| Pool charitable donations on one return | May increase credit |
| Spousal RRSP contributions | Higher earner contributes to lower earner’s RRSP |
| Pension income splitting (65+) | Transfer up to 50% to lower-income partner |
Breaking Up: Financial Implications
Separating Finances
| Task | Timeline |
|---|---|
| Notify CRA of status change | First return after separation |
| Close joint bank accounts | Immediately |
| Remove from credit cards | Immediately |
| Update beneficiaries | RRSP, TFSA, insurance |
| Change locks, passwords | Security measure |
Property Division
| Province | Common-Law Rights |
|---|---|
| BC | Equal division after 2 years cohabitation |
| Alberta | No automatic rights (agreement needed) |
| Saskatchewan | No automatic rights (agreement needed) |
| Manitoba | After 3 years, some property rights |
| Ontario | No automatic property rights |
| Quebec | No automatic rights (very limited) |
| Atlantic provinces | Varies β check your province |