The Canada Revenue Agency makes it clear that they want to know if you're married or have a common-law partner when it comes to filing your annual tax return. You'll need to indicate your marital status when filing your Income Tax return each year. But there's a big perk to the CRA knowing about your personal relationships and it comes in the form of significant tax benefits. Here's everything you need to know about filing your crypto taxes with your other half.
How to file crypto taxes with the CRA
Crypto is subject to Capital Gains Tax or Income Tax in Canada - depending on whether your activities are viewed as an individual investors’ or as business-like. You can learn more about how crypto is taxed in Canada in our Canada Crypto Tax Guide.
You’ll need to report any capital gains and losses from crypto, as well as any income from crypto, to the CRA as part of your annual tax return. You’ll report crypto capital gains and losses on Schedule 3 Form and additional income from crypto on the Income Tax Return T1.
The Canadian financial year is the same as the calendar year. You need to file your annual tax return for the previous financial year with the CRA by the 30th of April each year. For the current tax year (2022) the tax deadline also falls on a weekend so the filing deadline will be 1 May 2023. For self-employed people this will be the 15th of June 2023.
What’s the CRA guidance on filing taxes jointly?
Regardless of whether you're married or in a common-law relationship - you won't actually file jointly in Canada. Instead, every Canadian taxpayer files their own tax return and indicates their marital status on the return, as well as includes information about their spouse.
Once you're married, you must include your spouse on your tax return.
You also don't get to pick when to consider yourself a common-law partner - the CRA guidance states if you've lived for your partner in a conjugal relationship for 12 months, you're considered common-law partners. If you have a child, you'll be considered common-law partners as soon as you move in with that partner.
So if any of these circumstances apply to your situation - you must indicate this marital status in your annual tax return.
You can do this in the “information about you” section of your tax return. You’ll need to include information about your spouse, including:
- Their name
- Their social insurance number
- Net income
- Their employment status
If you’re using tax software like TurboTax, you may be able to prepare a “coupled” return. This means you’ll file information for you and your partner together, but you’ll still file separately with the CRA.
What does my marital status mean for my tax return?
It's good news for your tax return when you're married or in a common-law relationship, as you can reap the tax benefits. You may be eligible for more tax credits and deductions than if you were filing as a single taxpayer and this can help you reduce your overall tax bill for the year.
Let’s take a look at the different tax breaks available.
Spousal Tax Credit
The Basic Personal Amount is a non-refundable tax credit that any Canadian taxpayer can claim. It lets Canadian taxpayers claim back all the Federal Income Tax paid on an income provided they earn less than $14,398 in 2022.
If you’re married or in a common-law partnership and one partner earns less than the BPA, the other partner can use the difference to lower the amount of tax they owe by claiming the Spousal Tax Credit. For example, if you earn $60,000 a year and your partner earns $10,000 a year, you’d be able to claim the difference between your partner’s income and the BPA - in this example, $4,398.
You can also split investment dividends - like gains from crypto - between spouses to save on Income Tax. If one partner is in a lower Income Tax bracket, it’s beneficial to split any profits between both of you.
Many partners hold their crypto investments together and if you plan right, this can help you reduce your taxes. Let’s say a married couple holds 10 ETH together and later sell their 10 ETH. If they contributed equally when purchasing the ETH, the subsequent capital gain from selling the 10 ETH would be taxed 50% at one partner’s Income Tax rate and 50% at the other partner’s Income Tax rate.
When filing your tax returns, you’ll declare the asset(s) - 10 ETH in this instance. But you’ll put 50% in the box on your tax return that asks what percentage has been claimed by a spouse.
However, it’s important to note that when splitting investment profits, this needs to be legitimately based on the actual amounts contributed by each partner. So you can’t claim all crypto assets are split 50/50 between you both just to get a tax advantage.
For example, if in the above scenario one partner contributed 75% of the cash to purchase the ETH and the other partner contributed 25%, the subsequent gain should be split by those proportions too.
In a tax audit, the CRA may ask to see bank transfers between spouses to verify the legitimacy of the claimed split. For example, if one partner sent all the funds to an exchange to buy the ETH, they’d expect to see evidence showing the other partner sending them funds to cover their share of the joint investment.
Transfer Tax Credits
A great perk for married couples is the ability to transfer certain tax credits from one spouse to another, if you don’t utilize the full credit. Tax credits that you can transfer to your spouse include:
- Age amount
- Age amount
- Caregiver amount
- Pension income amount
- Disability amount for self
Canada crypto taxes with Koinly
Koinly helps you file your crypto taxes by doing all the math for you and generates your tax reports for you.
All you need to do is sync all the crypto wallets and exchanges you use via API or by importing a CSV file of your transaction history. Once you’ve done this, Koinly will identify your cost basis, taxable transactions and subsequent capital gains, losses and income. You can see all of this (totally free of charge) in your tax summary.
Once you’re happy with your tax summary - just upgrade to a paid Koinly plan to download your tax report. For Canadian investors, Koinly provides the Schedule 3 or Complete Tax Report.