Pay less tax – income splitting

Here is  Tip#5 from our series of  seven tax tips to think about when filing your tax return this year.

Tax Tip #5

Here is another way of paying less tax.  If you haven’t heard of  the income splitting tax plan, here’s how it works.  You can transfer income to a lower income spouse or a common law partner or your child. Your taxable earnings will decline. The catch is that the lower income individual must actually perform job-related duties. Also, you must keep employment records. The rule is, you must pay a wage or salary that commensurate with what you would pay another person to do the same job. AWhen you use this process, you can benefit on another level. The  hired spouse (child or common law partner) will beable to  contribute to the Canada Pension Plan (CPP) and also may contribute to an RRSP.

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