As an individual, you can save tax by using credits, deductions, exemptions and registered investment accounts. As part of a couple or family,
you have opportunities to save tax by transferring money to your spouse or a child who’s in a lower tax bracket.

Here are some of the more common methods of splitting income.


Due to attribution rules, if the higher-income spouse gives money to the lower-income spouse to invest in a non-registered account, the higher-income spouse is subject to tax on any income and capital gains. However, there’s an easy and effective way to get around this: the primary income earner pays all of the bills and household expenses, enabling the other spouse to make non-registered investments. Now, investment income is taxed at a lower rate. It’s helpful for each spouse to keep a separate bank account and investment account, in case the Canada Revenue Agency (CRA) wants evidence of how the lower-income spouse made the investments.


If your spouse or children lack the funds to contribute to their Tax-Free Savings Account (TFSA), you can give them the cash as a gift. This way, more family money is invested in a tax-free environment. Depending on a child’s situation, you may also or alternatively wish to gift funds
for their First Home Savings Account (FHSA) or Registered Retirement Savings Plan (RRSP). Quite often, a child who is just starting out builds RRSP contribution room, but rent or mortgage and car payments prevent them from making their full RRSP contribution. In all of these cases, the attribution rules do not apply.


Today’s pension income-splitting rules limit the ways a spousal RRSP can be useful, but benefits do remain. You contribute to a spousal RRSP in your income-earning years, receiving a tax deduction based on your current tax rate. Eventual withdrawals are favourably taxed at the spouse’s lower tax rate in retirement. Find more information in the Income-splitting in retirement section.


A business owner can hire their spouse or child, using company income to pay a family member’s salary. The salary qualifies as a tax deduction whether the company is a sole proprietorship or a corporation. Also, the spouse or child benefits tax-wise by receiving an RRSP tax deduction, provided they contribute to their plan. The job must be legitimately required for the business to operate, the pay must be appropriate for the position, and you should issue a T4 slip (and an RL-1 slip in Quebec).

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