- Dean C Paley, CPA, CGA ,CFP - http://deanpaley.com -

Understanding Income Splitting

The income tax you pay is based on a set of progressive tax rates. This means that the amount of income tax you pay increases as your taxable income increases. For example, in 2012 you would pay federal income tax of:

In addition to the federal income tax, each province in Canada charges progressive tax rates. Therefore, Canadians are motivated to lower their overall income tax payable by splitting income with family members.

Income splitting is a strategy of shifting income from a higher income earner to a lower income earner in order to reduce the overall tax paid by the family.

Limits To Income Splitting

Since the government needs its tax revenue, it has limited many of the income splitting opportunities [1]. However, some income splitting opportunities still exist [2] that will allow you to split income with your spouse or other family members.

Some Income Splitting Is Encouraged!

While many of the income splitting opportunities can be somewhat complicated, the government has specifically allowed Canadians to income split in three ways:

Looking For Professional Help?

There are a number of income splitting techniques that can be employed by business owners and seniors.

Call us at (289) 288-1206  or email us [6] to arrange an appointment to have us review your tax situation and look for opportunities to reduce your family tax bill.