Love and taxes: What the CRA needs to know about your intimate relationships

Canada’s tax-filing system doesn’t offer joint married or common-law partner returns, so everyone is required to file their own income tax return.

However, when preparing a T1 Income Tax and Benefit Return, the Canada Revenue Agency (CRA) wants to know if you have a spouse or common-law partner, because certain benefits — including GST/HST credits, Canada child benefits, child-care deductions and eligible dependent claims — are calculated based on family income and/or marital status.

Marital status options available in the return include:

• Married
• Living common-law (living with a person who is not your spouse where at least one of the following applies:
  • the person has been living with you in the conjugal relationship for at least 12 continuous months;
  • they are the parent of your child by birth or adoption;
  • they have custody and control of your child, and your child depends on them for support.)
• Widowed (spouse or common-law partner is deceased)
• Divorced
• Separated (more below)
• Single

Taxpayers are required to tick the appropriate box that applies as of Dec. 31 of the year for which they’re filing a return. Similar rules apply for provincial tax purposes in Quebec.

As simple as the above may seem, some situations are complex. Consider the following hypothetical scenario:

Duncan and Sue are a legally married couple who no longer reside together. Duncan has advanced dementia and has moved to a nursing home indefinitely. Duncan and Sue no longer have an intimate relationship — Duncan no longer recognizes Sue and doesn’t know her name. They no longer socialize together or perform domestic services for each other. They show almost no signs of a conjugal relationship, and Sue has made the decision not to care for Duncan other than visiting and ensuring that all of Duncan’s financial matters related to care are met.

Given the circumstances, Sue is unsure whether she should be filing her income tax return as married or separated.

The Income Tax Act (ITA) does not define the term “separated.” However, the CRA generally accepts that individuals are separated when they live separate and apart from their spouse or partner because of a breakdown in the marriage or common-law partnership for a period of at least 90 days without reconciliation.

The determination is a question of fact that depends on the specific details of the case. It is the CRA’s general position that spouses or partners are not living separate and apart for tax purposes when the separation is for reasons other than a breakdown of their relationship.

This might occur where the separation is for school, work or medical reasons. This position is supported by precedent: in Lawin vs. the Queen (2006), the Tax Court of Canada ruled that a separation occurring because one spouse was confined to a long-term medical care facility did not constitute separation on account of marriage breakdown.

The courts have considered a list of generally accepted characteristics of a conjugal relationship, or indications that individuals are not living separate and apart. They include:

• shared shelter
• sexual and personal relations
• services provided
• social activities
• social perception as a couple
• children
• economic support

The courts have concluded that these characteristics may be present in varying degrees, and not all are necessary for a relationship to be found “conjugal.” For example, one could have a conjugal relationship without sex, or sex without a conjugal relationship. Sexual relations are one element but not the only element of a conjugal relationship. Each characteristic is to be given its proper weight in the context of each case, and courts are generally flexible in applying the factors to determine whether a conjugal relationship exists.

Determining whether Duncan and Sue are living separate and apart because of a marriage breakdown would require a more thorough review of the details of their case than we can offer from the information given. Given the complexity of her scenario, Sue should consult with an experienced tax advisor for guidance. If the circumstances suggest that their separation was involuntary and due primarily to health reasons, their marital status would likely remain as married for purposes of their T1 Income Tax and Benefit Returns.

Wilmot George, CFP, TEP, CLU, CHS, is vice-president, Tax, Retirement and Estate Planning at CI Global Asset Management. Wilmot can be contacted at wgeorge@ci.com.

Wilmot George

Tax & Estate

Wilmot George, CFP, TEP, CLU, CHS, is vice-president, Tax, Retirement and Estate Planning at CI Global Asset Management. Wilmot can be contacted at wgeorge@ci.com.