How single Canadians can make the most of filing their taxes

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The deadline for filing taxes in Canada for 2024 is April 30. As the big day approaches, Globe Advisor and Globe Investor have teamed up to offer advice on how to maximize returns, find credits and avoid an audit. The full series can be found here.

Even though one-person families are the most common type of household in this country, according to Statistics Canada data, the tax system generally doesn’t benefit singles, with no credits and deductions specific to them.

Singles cannot split or share income the way couples can. For example, a single person earning $150,000 a year will pay around $12,000 more in taxes than spouses earning $75,000 each, says Wilmot George, vice-president and head of tax, retirement and estate planning at CI Global Asset Management in Toronto.

“We have a graduated tax bracket system in which the more you earn, the higher your tax rate becomes,” Mr. George says. “It’s based on individual incomes.”

So, how can advisors help singles save on their taxes? The first thing is for advisors to make sure their clients understand clearly the definition of “single” from a tax perspective, Mr. George says. For example, he says many people falsely equate single with a common-law relationship.

“Somebody who’s in a common-law relationship [is considered] a spouse for tax purposes,” he notes. “If they have been [living] in a common-law relationship for 12 continuous months or more without a breakdown of 90 days or more, or are parents to a common child, then they’re not single. They’re treated similarly to married people. That means they have to show their partner’s income on their tax return which can impact family benefits.”

Jackie Porter, certified financial planner at Carte Wealth Management in Mississauga, says as there are no unique credits for singles, they need to check all the tax credit and deduction boxes that apply to their situation.

She says registered retirement savings plan (RRSP) and tax-free savings account (TFSA) contributions are crucial for singles as they will be relying on just their sole income.

One income means their money must work that much harder, Ms. Porter notes, adding they should also look at all incentives that may give them “free money.”

“Don’t take your paycheque for granted, really look at the different programs available,” she says. “If the employer is matching RRSP contributions, for example, take advantage of that. It’s a great way to maximize the RRSP deduction. Are they offering stock purchase plans?”

If a single client tends to receive a hefty tax refund every year, Ms. Porter might advise they look into having their employer fill out the form T1213 Request to Reduce Tax Deductions at Source. Doing so would give them more money on each paycheque rather than giving the government an interest-free loan, she says, noting the money could be used to invest more upfront.

A single client with a side hustle may be able to claim a portion of their rent or mortgage interest and utilities, she adds.

Ms. Porter has also found more single clients caring for aging parents within her client base. “They are trying to figure out how to do it while taking care of themselves financially too,” she says.

She advises them to speak to their accountant about credits and deductions available in that area, such as the Canada caregiver credit. They could also look into whether their aging parents have tax credits to help stretch the money further.

Being a single parent opens up more credits and deductions. The child care deduction allows single parents to claim daycare and camps. In the case of older children attending university, the child can transfer tuition amounts to the parent. And the amount for an eligible dependant, which is a credit available only to single parents, allows them to claim their children or grandchildren under 18 who live with them, Mr. George says. They can even make the claim if the child is 18 or older and has a physical or mental disability.

A person who is paying spousal support can claim that amount as it is normally tax-deductible, he adds. Child support, generally, is not.

Mr. George says single people shouldn’t forget to claim their charitable donations. They could also consider donating publicly traded securities in kind, as doing so will eliminate any capital gains taxes on securities that have increased in value.

Finally, from an estate planning standpoint, singles need to understand what taxation looks like at the time of death, Mr. George says. Transferring assets to defer taxes can happen with a spouse or common-law partner, but there are “very limited” opportunities for singles to do something similarly with, say, a child.

“Before or at death, you can gift assets to adult kids and there’s no attribution of future income. So, that’s an income-splitting opportunity with adult kids,” he says. “You can do the same with minors as it relates to future capital gains. So, clients need to look for those types of income-splitting opportunities.”

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