How having a child together affects your tax situation

Q. My partner and I have a child together, and recently moved in together. We are in our 30s, both with good careers, and are financially independent of each other. I am on maternity leave now and am not working. Would we have to file our tax return as common-law partners even though I am still financially supporting myself when not working?
–Elise

A. The question of financial independence versus common-law status and, ultimately, the filing of your tax return are all very separate issues.

First, I cannot answer your question about whether you and your partner should file as common-law, as the answer to that question is best left to a tax accountant to determine. (These definitions of marital status from the Government of Canada will help you prepare for that conversation.)

What I can tell you is this: Sharing a child changes parts of your status when it comes to tax laws and how you file your returns, and it can also come into play if the relationship with your co-parent breaks down in the future. It’s important to note that filing as common-law does not disadvantage you in any way, since all Canadians are taxed on their individual incomes at their own personal tax rate.

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More important, not filing as common-law when living as such could get you into trouble with the Canada Revenue Agency (CRA), and may also affect future claims on government benefits—namely the Canada Pension Plan (CPP)—should your common-law spouse become disabled, or die.

Elise, from your question I gather that your independence is very important to you. The best way to protect this independence is to get good legal advice and perhaps even write up a cohabitation agreement for the two of you so that things are set out for all parties, both now and into the future.

I also recommend that you seek the advice of a tax accountant so that you understand the reasons for filing as common-law, and the advantages you would be giving up by not doing so. I’m assuming that you would like to make sure your child is looked after financially, and so you might consider engaging a Certified Financial Planner to help you look at your situation from different perspectives in this regard. A planner can also crunch the numbers for you so you know exactly what your bottom line will be by filing common-law—including what financial benefits you can hope to receive in the coming years.

Debbie Hartzman is a Certified Financial Planner, a Chartered Life Underwriter and Certified Divorce Financial Analyst in Kingston, Ont. She is also the author of Divorce Isn’t Easy But It Can Be Fair.