Income Splitting With Family Members

Consider the following legitimate means of shifting income to family members whose taxable income is below the minimum tax rate level of approximately $35,000. This will allow them to take advantage of certain non-transferable credits, as well as lower tax rates. 

         >  Shift investment income by gifting money to your adult children, or to a trust for their    
             benefit, if you wish to maintain control.

         >  Lend funds to, or purchase shares in, a corporation whose shareholders are your
             adult children.   

• Income splitting with adult or minor children:

       >  Purchase appreciating assets in the names of your children regardless of their ages.

           Capital gains will be taxed in their hands, not yours.

       >  Lend money to your children with actual interest payable at the prescribed rate.

           Earnings in excess of this rate will be taxed in their hands.  

•  Income splitting with your spouse or common-law partner:

         >  Lend money to your spouse or common-law partner to earn business income.

         >  Have the higher-income spouse or common-law partner incur all household 
            expenses, thus allowing the lower income person to acquire investments which

            could be taxed at a lower rate.

         > Lend money to your spouse or common-law partner with actual interest payable at

            the prescribed rate. Earnings in excess of this rate will be taxed in your spouse or

           common-law partner's hands.