Income splitting

There exists various income splitting strategies that can be very beneficial for certain professionals depending on their family’s financial situation. 

 

An incorporated professional taxed at the highest marginal rate (e.g. 53% in Quebec) could save significant amounts of money every year by splitting income with a spouse or adult children with little or no income. Essentially, income splitting consists in a high rate taxpayer, such as a healthcare professional, transferring a part of his/her income to a family member taxed at a lower tax bracket.

 

It goes without saying, if both spouses or adult children are in the same tax bracket, income splitting will not provide the benefit of a reduction in the marginal tax rate. 

 

With these various income splitting strategies, care must be taken to avoid the income tax attribution rules.  

 

See an example of income splitting.