A Bigger Slice

gift to young families, Tory tax goodies might also benefit seniors

Tory tax goodies might benefit seniors

IN 2007, the Conservatives unveiled pension income splitting as a tantalizing plum to woo older voters, virtually guaranteeing their support in the 2008 federal election. With another election looming in 2015, the Tories are at it again, this time offering a gift that may not specifically help seniors, but will certainly benefit their cash-strapped children. Highlighting the latest bounty to voters is income-splitting – that long discussed and contentious measure will finally see the light of day. If all goes to plan, this proposal will become law by early 2015 and will take affect on your 2014 income tax return. Available only to families with children under the age of 18, the targeted measure aims at reducing a family’s annual tax bill by allowing the higher earning spouse to assign up to $50,000 of his/her income to the lower earner. The savings realized from this move will come in the form of a tax credit, which will be capped at $2,000.

Although the final mechanics of income-splitting won’t be known until details are released by the federal government, Aurèle Courcelles, director of tax and estate planning at Investors Group, feels the measure will have its greatest impact on families where there’s a big gap between earners. “In a scenario where one spouse or partner earns $60,000 and the other $12,000, the family could realize a $1,200 tax credit,” says Courcelles. “Or, in a case where one spouse makes $100,000 and the other $30,000, with income splitting, this family could get a $1,400 credit.” Unfortunately, in the case where both spouses earn the same amount, there will likely be no savings.

Besides income splitting, the government has unveiled further “family-friendly” measures, including upping Universal Child Care Benefit payments, increasing the Child Care Expense Deduction dollar limits and doubling the children’s fitness tax credit (to $1,000).

Of course, many will use this unexpected windfall from these measures on a vacation or new TV. Courcelles, however, suggests we use our parental wisdom and encourages parents to take a more prudent course by incorporating this found money into their financial plans, including: paying down debt shoring up their insurance needs bolstering retirement investments, RRSPs or TFSAs investing in a registered education savings plan (RESP) for their children Not only do these moves make sound financial sense but some may also result in fewer cash appeals from our suddenly flush children. —Peter Muggeridge