The workings of Quebec’s new cost-of-living credit and the tax implications of being a couple were among the topics raised recently by readers. Here’s what they wanted to know.
Q: How does the $500 cheque recently announced by the Quebec government affect my taxes? Is it a taxable benefit? Where on the tax return do you claim it?
A: Unlike the $500 payment that older seniors received last summer from Ottawa, the cost-of-living payment provided by Quebec to residents who file a 2021 tax return is a refundable tax credit, so it isn’t treated or reported as income on either the federal or provincial tax returns. You needed to be at least 18 on Dec. 31, 2021, with net income below $100,000, to qualify for the full $500. Above that level of income, the amount is reduced and phased out completely at $105,000. There is no line to claim it on the provincial tax return. Revenu Québec determines your eligibility when it processes your 2021 return and will either add it to your refund, apply it to any amount owing or send you the $500. It doesn’t want taxpayers to do the math themselves, so if you have a balance due, say, of $2,500 on your 2021 tax return, you’re supposed to pay the full $2,500 and the credit will be remitted in a separate transaction. Those who filed their returns and received notices of assessment prior to the March 22 announcement are supposed to get their special payment by the end of May. If you miss the May 2 tax-filing deadline, you’re still eligible to receive the $500, if and when you complete your 2021 return. Incidentally, people who died in 2022 qualify for the credit.
Q: I am a widower, age 87, and have been living common law with a widow, 81, for 12 years, although we always filed our tax returns separately. She recently asked me if we could combine our incomes for tax purposes to reduce her tax bill. She is willing to compensate me for my higher tax payments. I earn about $31,186, and she has revenue of $114,761, most of it from investments. What would be the advantage or disadvantage of the arrangement?
A: If you’ve been living common law for 12 years, that should have been reported to the tax departments already. It’s supposed to be done when you’ve lived with someone in a conjugal relationship for 12 consecutive months. Whether it will be advantageous from a tax standpoint is not clear. Your current income makes you eligible for government benefits like the Solidarity Tax Credit and GST credit, but you won’t be if you’re a couple, since those benefits are based on family income. Splitting up to 50 per cent of eligible pension income is how couples can effectively shift income from a higher-taxed partner to one in a lower tax bracket, provided both parties agree to it, but if most of her income is from investments, not pensions, that wouldn’t apply. Old Age Security and Quebec Pension Plan benefits aren’t eligible to be split in that manner.
Q: Would the amount of Old Age Security (OAS) received by me or my partner be affected in any way if I entered into a common-law or marital relationship with another person over the age of 65?
A: No. Your OAS entitlement is based on how long you have lived in Canada after the age of 18. (Forty years gets you the maximum). The income of your partner is not considered. It is taken into account, however, in the calculation of the related benefit, the Guaranteed Income Supplement (GIS), which is available to low-income seniors. So there could be an effect on GIS if you or your partner are receiving that on top of OAS. If either of you is in a high tax bracket and currently subject to the OAS clawback (which is phased in at income of $79,845 in 2021), the clawback might be reduced through a split of eligible pension income, which couples can do.
The Montreal Gazette invites reader questions on tax, investment and personal finance matters. If you have a query you’d like addressed, please send it by email to Paul Delean at [email protected]
Delean: Navigating capital gains taxes and the principal residence exemption
Delean: Inevitable questions about death and taxes
Paul Delean: Complex multiplex tax effects
Delean: Financial advisers must disclose fees in dollar amounts