Income-splitting is a strategy available to married couples or common-law partners, and can result in the reduction of a household’s overall tax bracket (potentially alleviating some tax burden).
Essentially, the higher earning spouse can transfer a portion of their income to the lower earning spouse, creating a similar income level when it comes to tax purposes – which ultimately reduces tax on the split income.
This can also be done with pension income, although the process is a little different in this context (as there is up to a 50 per cent split for pension income).
Income-splitting often takes place when preparing for retirement or during retirement, as income-splitting can help place you in a lower tax bracket.
This strategy can be achieved in a variety of ways, including: splitting loans, spousal RRSPs, or offering a reasonable salary to a family member.
If you have any questions about how you can potentially take advantage of income-splitting, reach out to one of our advisors in Huntsville, Powassan, North Bay, Orillia or Parry Sound today.
Spire Advisors of Assante Capital Management Ltd.