By Sheryl Smolkin
Just before Halloween, Prime Minister Stephen Harper announced a limited income- splitting proposal, based on a contentious election promise from the 2011 campaign. The new measure which will be effective for the 2014 tax year allows a parent with children under 18 to transfer $50,000 of taxable income to a spouse in a lower income tax bracket. The maximum benefit is capped at $2,000.
Whether you think this was “a trick” or “a treat” will depend on your tax bracket and whether or not only one of two parents in your family is earning income. Here are what some financial bloggers and columnists have to say about the new provisions.
In How Income Splitting Works, Dan Wesley at “Our Big Fat Wallet” explains existing permissible methods of income-splitting like paying your spouse to work in your business or spousal RRSP contributions. He then concludes by discussing the recently announced new income splitting measures for families.
In The truth about income splitting: We take what we can get, Globe and Mail columnist Rob Carrick writes, “It’s a niche benefit that discriminates against single parents, favours families with one big earner and applies to no more than 15% of households, according to estimates from various think tanks.
Law Professor Katherine Lahey blogs at “Canadians for Tax Fairness.” She writes that income splitting and other announcements to family benefits announced at the same time amount to Huge Tax Cuts for Rich Families
The Canadian Council for Policy Alternatives links to a blog David MacDonald wrote in 2011 when the Harper government first floated the idea of income splitting for families. He sheds light on the The Real Numbers Behind Income Splitting and like Lahey said the impact could be “Robin Hood in reverse,” i.e. taking from the poor to give to the rich.
Richard Welland suggests on his blog Your Estate Matters that The “Family Tax Cut” is not income splitting in spite of media reports. He’s reviewed the amendments and thinks that at most it is “simulated income splitting.” He goes on to explain how the program will work.
And finally, in several earlier blogs, on Retire Happy, the ever popular Jim Yih posted Income Splitting Strategies in Retirement and Income Splitting Strategies for Families, while acknowledging that opportunities for income splitting in Canada are few and far between.
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