Getting Married Across the Border: Filing Status, the Joint-Return Election, and What Each Country Does With a Foreign Spouse

A cross-border marriage produces a couple with two tax systems and, often, two residences. The US taxes married couples jointly or separately by election; Canada taxes each spouse individually but attributes income between them and lets them share certain credits and pension income. A US citizen with a Canadian spouse who is not a US person can elect to file jointly, which brings the Canadian spouse's worldwide income into the US return; declining the election leaves the US citizen filing as married filing separately, which is the least favourable status. The choice, and the reporting that follows, depends on where each spouse lives and what each earns.

Key takeaways

• US filing status: a US person married to a non-resident alien is "married filing separately" by default (no joint return, the lowest standard deduction, the tightest brackets). Under section 6013(g), the couple can elect to treat the NRA spouse as a US resident and file jointly, at the cost of reporting the NRA spouse's worldwide income and accounts.
• Canada: spouses file individual returns; the higher earner may claim the spouse or common-law partner amount if the lower earner's income is below the threshold; income from property one spouse gives or lends to the other is attributed back; pension income can be split up to 50%.
• A non-resident spouse in Canada (a Canadian resident married to a US resident) is still a spouse for Canadian purposes; the spousal amount is available for a non-resident spouse only if the non-resident's worldwide income is low and the Canadian spouse supports them.
• Gifts between spouses: unlimited and tax-free in Canada (with attribution of income); unlimited in the US only for a US-citizen recipient spouse, capped at about $194,000 a year for a non-citizen spouse.
• Estate: the US marital deduction is unlimited for a US-citizen surviving spouse and available for a non-citizen spouse only through a qualified domestic trust; Canada rolls property to a surviving spouse tax-deferred regardless of citizenship.

The 6013(g) election

A US citizen married to a Canadian who is not a US person chooses between:

Married filing separately. The US citizen reports only their own income; the Canadian spouse files nothing in the US. The standard deduction is half the joint amount, the brackets compress, and several credits are unavailable. The Canadian spouse's Canadian accounts are not on the US citizen's FBAR unless jointly held.

Joint return under 6013(g). The couple elects to treat the Canadian spouse as a US resident for the whole year and files jointly. Both spouses report worldwide income; the Canadian spouse's Canadian tax produces foreign tax credits; the couple gets the joint standard deduction and brackets. The Canadian spouse's accounts go on the FBAR and Form 8938, their Canadian mutual funds become PFICs, their TFSA becomes a foreign trust, and their RRSP is reported. The election continues until revoked, and once revoked cannot be made again.

The election makes sense when the Canadian spouse has little income (the joint brackets and deduction help) and few problematic accounts. It makes little sense when the Canadian spouse is a high earner with a TFSA, mutual funds, and a corporation, because the compliance cost exceeds the rate benefit and the Canadian spouse's foreign tax credits usually cover the US tax anyway.

A US citizen living in Canada with a Canadian spouse often files married filing separately and claims the spouse's income only for the foreign earned income exclusion or foreign tax credit computations on their own income.

The Canadian side

Canada taxes each spouse on their own income at their own rates. The spouse or common-law partner amount (a non-refundable credit worth about $2,400 federally) is available to the higher earner if the spouse's net income is low. Attribution rules tax income and capital gains on property transferred or lent to a spouse back to the transferor, which limits income splitting. Pension income splitting allows up to 50% of eligible pension income to be allocated to the spouse. Spousal RRSP contributions let the higher earner deduct contributions to the spouse's plan.

A Canadian resident married to a US resident is still married for Canadian purposes. The spousal amount requires that the non-resident spouse's worldwide income be below the threshold and that the Canadian spouse support them. Attribution applies to gifts to a non-resident spouse only for income taxable in Canada.

Gifts and estates

Canada has no gift tax; gifts between spouses are tax-free with attribution of the income. The US allows unlimited gifts to a US-citizen spouse and caps gifts to a non-citizen spouse at an annual amount (about $194,000); gifts above it use lifetime exemption and require Form 709.

At death, Canada rolls capital property and registered plans to a surviving spouse tax-deferred; the deemed disposition is postponed to the survivor's death. The US allows an unlimited marital deduction for property passing to a US-citizen spouse; for a non-citizen surviving spouse, the deduction is available only if the property passes into a qualified domestic trust, which defers the estate tax until distribution or the survivor's death.

Immigration and the timeline

Marriage to a US citizen opens the path to a green card, and the green card date is a US tax residency start date. A Canadian who marries a US citizen and stays in Canada is not a US person until they take the green card or meet the substantial presence test; the 6013(g) election can bring them in earlier for tax purposes only.

Worked example

A Toronto physician ($400,000 CAD, with a professional corporation and a TFSA) marries a US citizen who moves to Toronto and earns $60,000 CAD.

• US citizen's return. Married filing separately; reports own $60,000 CAD with a foreign tax credit; FBAR on own Canadian accounts only. No 6013(g) election: the physician's corporation would become a CFC, the TFSA a foreign trust, and the $400,000 would enter a US return for no benefit.
• Canada. Each files a T1. No spousal amount (both incomes exceed the threshold). Spousal RRSP contributions by the physician to the US citizen's plan permitted; the US citizen's RRSP is treaty-deferred.
• Gifts. The physician can give the US citizen spouse unlimited amounts tax-free in Canada; the US citizen can give the physician up to about $194,000 a year without Form 709.
• Estate. Canada rolls to the survivor. The US citizen's estate passing to the physician (non-citizen) needs a QDOT for the marital deduction if it exceeds the exemption.

Official sources

"Each spouse must report their entire worldwide income for the year you make the choice and for all later years unless the choice is ended or suspended." — Internal Revenue Service, Nonresident Spouse, https://www.irs.gov/individuals/international-taxpayers/nonresident-spouse

"Generally, you can claim the spouse or common-law partner amount if ... you supported your spouse or common-law partner at any time during the year and their net income ... was less than your basic personal amount." — Canada Revenue Agency, Line 30300 – Spouse or common-law partner amount, https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/about-your-tax-return/tax-return/completing-a-tax-return/deductions-credits-expenses/line-30300-spouse-common-law-partner-amount.html

Practitioner note

The 6013(g) election is offered by every US preparer to every mixed couple, and it is right for about a third of them. The other two-thirds have a Canadian spouse whose accounts and income would cost more to report than the joint brackets save. We run the return both ways before the couple decides, and we tell them the election is one-way.

See also: Planning a move? Start with the Canada-to-US tax checklist and browse every corridor by city, province, and state.

Next step

Fairlight prepares the filing status analysis, the returns in both countries, and the gift and estate planning for cross-border couples. See cross-border pricing or book a call.