This is a tax planning strategy of arranging for income to be transferred to family members who are in lower tax brackets than the one earning the income, thus reducing taxes. Even though attribution rules limit income splitting, there are still a number of legitimate ways to do so, such as through the use of spousal RRSPs.
A simple strategy for couples where investments are put in the name of the partner (husband, wife, de facto) who has the lower income and lower tax bracket. This helps both partners pay lower marginal tax rates.
The transfer of income from a higher-earning family member to one in a lower tax bracket for purposes of reducing the family's overall tax owed. This strategy can be implemented legitimately through the use of a spousal RRSP. For more information and a practical example of income splitting, please click here.
A process that permits the higher-earning partner to shift income to a spouse in a lower tax bracket. If one spouse is earning little or no current, taxable income, the other may deposit some or the entire allowable RRSP limit in the spouse's name while claiming the deduction personally. The advantage is that the lower-earning spouse reports the income for tax purposes at maturity.
Distributing taxable income from an individual in a high tax-bracket to one in a lower tax bracket to reduce the overall taxes you have to pay. For example, setting up a spousal RRSP in the name of the spouse with a lower tax bracket.
is the action of apportioning income between family members instead of all of it going to one person. The effect for couples is to reduce total tax liability by allowing one or other or both of the partners to move to a lower tax bracket. Family trusts are often used for income splitting by diverting income to children and non-working spouses.
A tax planning strategy, where investment or trust income is split between two or more people, with the result that less tax overall is paid on the income than if one person alone had earned the income.
