In­come split­ting as a tax plan­ning strat­egy – Part 2

The Prince George Citizen - - SPORTS -

Note that any ref­er­ence to “spouse” in this article also refers to a com­mon-law part­ner.

The strat­egy of in­come split­ting takes ad­van­tage of our pro­gres­sive tax sys­tem where as an in­di­vid­ual’s tax­able in­come in­creases, their mar­ginal tax rates in­crease.

A sound in­come-split­ting strat­egy en­ables spouses to shift in­come from a higher in­come spouse to a lower-in­come spouse. Sim­ply gift­ing cash to a lower-in­come spouse for in­vest­ment pur­poses is not an ef­fec­tive plan as the in­come at­tri­bu­tion rules will likely ap­ply.

These rules will re­sult in any first gen­er­a­tion in­vest­ment in­come earned on the cash gifted to at­tribute back to the higher in­come spouse for tax pur­poses.

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