Income Splitting

Income splitting is a family tax planning technique designed to reduce your tax liability by shifting income from a high rate taxpayer to a lower rate taxpayer such as a spouse or children.

A common misconception of income splitting is that you simply use a joint account or gift the excess cash to your spouse. This is not how income splitting works. The allocation of income to each spouse can be manipulated using tactical strategies when paying expenses, taking income from a RRIF, and more.

There are a number of opportunities for income splitting, and in a lot of cases the benefits can be substantial. Before retirement, one common method to split income is the spousal RRSP.  The higher income spouse contributes into a spousal RRSP, which allows them to receive the tax deduction at the higher tax bracket.  During retirement, when the lower income spouse withdraws money from the account, the income will be taxed at a lower rate.  As of June 22, 2007, income splitting is available with any type of pension benefits, such as CPP, OAS, GIS, IPP, and RCA.  

The laws for taxes are intricate and difficult to circumvent. A financial professional can assist you by distributing your or your spouse's income in a legal and efficient manner to make sure you aren't paying more taxes on your income than you should be.

There are many different approaches to income splitting. For further information on how this is done, have a look at these links:

CBC: Income splitting: Frequently asked questions

Vancouver Sun: Why you should ask your spouse for money

What shape is your future in?

Try our simple diagnostic tool to score your financial well-being.

Learn More

Join the Devries Community

Sign up for our information and event updates.

Sign Up