Smart tax tips:

Family Tax Cut is now available!

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  • Family Tax Cut is now available!
  • Beginning with the 2014 tax year, the government is permitting notional income splitting for couples that have children under the age of 18. The higher-income earning spouse or common-law partner can notionally transfer up to $50,000 of income to the lower- income earning spouse or common-law partner each year. Tax savings are capped at a maximum of $2,000 per year per family and are provided in the form of a non-refundable income tax credit known as the Family Tax Cut.

    The Family Tax Cut can only benefit those couples with minor children where there is either one income-earner, or where there are two income-earners and one spouse or common-law partner is subject to a lower marginal rate of tax than the other. For example, assume Dave earns income of $200,000 per year and is, therefore, subject to the highest marginal federal rate of tax of 29 percent. His wife, Marsha, earns income totalling $45,000 and is subject to a much lower federal marginal tax rate. If Dave were to transfer $50,000 of his income to Marsha, it would be taxed in Marsha’s hands at a lower federal rate (most of it at 22 percent). The actual reduction in the overall combined income tax liability for the couple in this case would be more than $2,000, but the tax savings allowed would be capped at $2,000 and claimed as a non-refundable tax credit, provided certain conditions are met. The credit can be claimed by either person, but not both.

    The Family Tax Cut is calculated on Schedule 1- A, Family Tax Cut and is completed and filed together with your 2014 personal income tax return.

    March 17, 2015