If you have a spouse (or common-law partner) with little or no income whom you support, you can claim the spouse tax credit. For 2020, the federal credit is 15% of the amount by which $13,229 exceeds your spouse’s or partner’s income for the year, if your income for the year is $150,473 or less. (If your income exceeds $150,473, the credit is reduced gradually, and down to 15% of $12,298 in excess of your spouse’s or partner’s income if you are in the highest tax bracket; see the January Tax Letter regarding the changes to the personal and spouse credit for 2020.) Accordingly, the credit is reduced to the extent your spouse has any income and is eliminated once your spouse’s income reaches $13,229 or more (or the reduced dollar amount if your income exceeds $150,473). A provincial credit is also available and the amount depends on the province.
If your spouse is dependent on you by reason of mental or physical infirmity, the federal credit is increased to 15% of the amount by which $15,502 exceeds your spouse’s income if your income for the year is $150,473 or less (again the credit is reduced if your income exceeds that amount).
The spouse credit is available if you were married or in a common-law relationship at any time during the year. Therefore, if you separate or divorce during the year, you can still claim the credit. In such case, the other person’s income for the purposes of the credit includes only the income for the period before the breakdown of the marriage or common-law relationship. However, you cannot claim the credit if you deduct spousal support in the year of the breakdown. In other words, you can choose to claim the credit, or take the support deduction, whichever is more beneficial.
You can claim only one spouse credit for a year, even if you have more than one spouse or common-law partner during the year.
Eligible dependent (equivalent to spouse) credit
If you are not married or common-law (or still married, but separated and you do not support your spouse and your spouse does not support you), you may be able to claim the “eligible dependant credit”, often called the “equivalent to spouse credit” because the amount of the credit is the same as the spouse credit.
You can claim this credit if you have a related person living with and “wholly dependent” on you, if the person is 1) a child under the age of 18, or 2) your parent or grandparent, or 3) dependent on you by reason of mental or physical infirmity.
As noted, the amount of the credit is equal to the spouse credit, and is reduced in the same manner as the spouse credit to the extent of the dependent relative’s income for the year.
You cannot claim this credit for a year if you claimed the spouse credit for the same year – for example, if you separated from your spouse during the year and have a dependent relative living with you for another part of the year. If you are eligible for both credits in the year, you can choose the one that is more beneficial – normally in respect of the dependent with the lower income. The CRA provides the following example:
Khalid and Sabina are married and have a ten year old son, Samir. In June 2018, Khalid and Sabina separate, and Samir lives with Sabina after the separation. Sabina meets the requirements for claiming the spouse or common-law partner tax credit in respect of Khalid for the period of the year before the separation. Sabina also meets the requirements for the eligible dependant [equivalent to spouse] tax credit in respect of Samir for the period of the year after the separation.
In this case, Sabina can claim whichever of the two credits is more beneficial to her for the year. Whichever credit she chooses to claim, she will be unable to claim the other credit for that year.
Like the spouse credit, you can claim this credit only in respect of one dependent. Similarly, only one person can claim the credit in respect of the same dependent.
You cannot claim this credit in respect of your child in a year if you are divorced or separated and have not lived with your spouse or former spouse (or partner) throughout the year, and are required to pay them chid support.
Canada caregiver credit
You can claim this credit if someone is dependent upon by you by reason of physical or mental infirmity and they are either your spouse or common-law partner, or one of the following if they are 18 years of age or older: your child or grandchild or that of your spouse or partner; or your parent, grandparent, brother, sister, uncle, aunt, niece or nephew, or that of your spouse or partner.
The federal credit is 15% of the amount by which $7,276 exceeds the amount by which the dependent’s income exceeds $24,361, if any. Thus, the full credit is available if the dependent’s income for the year is $24,361 or less, and is reduced when the income exceeds that amount.
Technically, you could qualify for both the spouse credit and the caregiver credit in respect of a spouse or partner who is dependent upon you by reason of infirmity, but an ordering rule says you must choose to claim the spouse credit. Similarly, you could qualify for both the equivalent to spouse credit and the caregiver credit in respect of an adult relative who is dependent upon you by reason by infirmity, but you must choose the eligible dependent credit.
In many cases, the spouse or eligible dependent credit is more generous in any event, as the base credit amounts are higher than the caregiver amount.
However, the caregiver credit is phased out only to the extent that the dependent’s income exceeds $24,361, while the spousal and eligible dependent credits start to be phased out once the dependent has any income. In cases where the caregiver credit exceeds the other applicable credit, you can “top up” the other credit by the excess.
Your spouse is dependent upon you by reason of infirmity, your income is less than $150,473, and you qualify for both the spouse credit and the caregiver credit. Your spouse’s income for the 2020 is $10,000.
You must first claim the spouse credit, which is 15% x ($15,502 − $10,000) = $825.
However, the caregiver credit would equal 15% x $7,276 (since your spouse is below the income threshold) = $1,091.
Therefore, your total credit is $825 + ($1,091 − $825) or simply $1,091.
Of course, if you only qualify for one of the credits, you simply claim that credit. For example, both the spouse and eligible dependent credit require that the dependent live with you during the year, while the caregiver credit does not have a live-in requirement. Thus, if you have an infirm adult relative dependent on you for support who does not live with you, only the caregiver credit can be claimed.
Unlike the spouse and eligible dependent credits, you can claim the caregiver credit in respect of more than one person − for example, if you have two adult infirm relatives who are dependent upon you.
If more than one person is entitled to the caregiver credit − say, if you and your spouse support an infirm relative − one of you can claim the credit or you can share the credit.