How Canadians Can Split Their Income and Lower Their Tax Bills

Most Canadians, if not all, actively look for ways to decrease their taxes. Unlike the United States, Canada requires citizens to file individual tax returns, regardless of marital status. Despite Canada’s strict taxation laws, there are some strategies Canadians can use to split their income between family and spouses, ultimately lowering their tax bill.

One simple strategy is for those who are self-employed. These individuals are able to employ family members and pay them a tax-deductible salary. This can be a beneficial strategy, especially when the compensation paid to the family member is taxed at a lower rate than the employer. This strategy is only effective if three conditions are met. The salary must actually be paid to the family member, the work the family member does must generate income for the business, and the salary must be in-line with the pay for an employee who is not part of the family.

Business owners are also able to split their income if they incorporate their business. This allows the individual to be taxed only on the salary they pay themselves, while the business income will be susceptible to corporate tax. For small businesses, corporate tax can range anywhere between 10-12.2%, while the highest individual tax bracket can reach as high as 54.3%

For more information on how you can lower your personal tax bill, follow the link below.

https://financialpost.com/personal-finance/taxes/canada-split-income-lower-tax-bills