Income Splitting : Tax tips

 

Income Splitting

Several court decisions on income splitting and the use of management service family trusts and partnerships raised concerns over leakage in tax revenue. The 1999 Canadian federal income tax budget curtailed income splitting with minors via taxable dividends paid on private company shares and business income earned by management partnerships that provide administrative and other services to related businesses.

Earn more than your spouse?

If you earn more than your spouse, one way to transfer funds to him or her for investment without having the investment income subject to Canadian income tax in your hands is to directly pay your spouse's tax liability, including tax installments that come due during the year. Funds that your spouse would otherwise use to pay income taxes can be invested and any income earned would be taxed at your spouse's lower tax rate.