Tax planning for new couples

If you are part of a new couple, you and your spouse have probably talked about your finances. But do you have a tax strategy? Here are some tax planning tips for new couples from Chartered Accountant Marco Zuiani, a partner with BDO Canada LLP in Burlington.

---

Make sure your tax filings are up to date – “If you are a new couple, the first thing to do is to confirm is that you have filed your tax returns and that you don’t owe any income taxes,” says Zuiani. “If one or both of you owe money to the Canada Revenue Agency, pay it back as soon as possible and file on time in the future to avoid penalties.” Check out programs and tax credits that are based on family income – “Many programs and credits, such as the Canada Child Tax Benefit, Ontario Property Tax Credit and GST credit are based on family income, so it’s important for both spouses to file returns,” explains Zuiani. If you have children, start a Registered Education Savings Plan (RESP) – “Most children attend college or university these days, and it is very expensive,” says Zuiani. “An RESP is an excellent savings vehicle, and the government will also provide grants of up to $7,200 over the lifetime of the RESP. Start an RESP as early as possible and take advantage of the grant component.” Develop an RRSP strategy – If you are able to make RRSP contributions, it may make sense to contribute only to the RRSP of the higher-income spouse, instead of splitting the contribution between both of your RRSPs. “This is because the higher-income spouse is being taxed at a higher rate,” explains Zuiani. “The lower-income spouse can always carry the RRSP contribution room forward to a year when he or she will have a higher income.” You may also want to consider contributing to a spousal RRSP. Also keep in mind that under the federal Home Buyers’ Plan, you and your partner may each be able to borrow up to $25,000 from your RRSPs to buy or build a house. A number of conditions apply, so be sure to seek professional advice before going this route. “Many new couples wonder whether they should pay down their mortgage or contribute to their Registered Retirement Savings Plan (RRSP),” says Zuiani. “It is also important to reduce your mortgage if you can, because mortgage interest payments are not tax deductible.” If possible, couples should budget to annually pay into an RRSP and pay down their mortgage. Combine claims for charitable donations and medical expenses – “Claims for charitable donations should be combined and filed by the higher-income spouse to maximize the tax credit for the spouse being taxed at the higher rate,” says Zuiani. “On the other hand, it usually makes sense for the lower-income spouse to claim medical expenses on his or her return.” Talk to a Chartered Accountant – “CAs are professionals who will analyze your tax situation and answer your questions,” says Zuiani. “Our goal is to work within the rules to minimize tax.” Brought to you by the Institute of Chartered Accountants of Ontario