Tag Archives: income splitting

Income Splitting Strategies – The Spousal Loan

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Matthew Ardrey

By Matthew Ardrey

Special to the Financial Independence Hub

With the recent changes in tax legislation at the federal level, married or common-law couples may now find there is a greater disparity in their marginal tax rates than ever before.

As both members of the relationship must file their taxes separately, it makes sense, where allowed, to place taxable investment income into the hands — and onto the tax return — of the lower-income spouse.

Unfortunately, straightforward gifts of investment property, typically cash or securities in-kind, will not accomplish this objective, as they invoke the income attribution rules.

The attribution rules state, that if one spouse gifts to the other for the purpose of investing, then all of the income and capital gains earned by the recipient spouse will be taxed in the hands of the gifting spouse. Essentially the attribution rules would eliminate any tax benefit available from the gift.

Conditions for loans that avoid attribution rules

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Wealthy investors dodge capital gains bullet but little else to cheer about in Budget

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motley-fool-logoHere’s my latest blog for Motley Fool Canada: Investors dodge bullet on capital gains but little else to cheer about in Budget 2016.

Note the paragraph about the the roadblocks put in the way of two strategies involving life insurance, often used by business owners. You can find more detail about this in yesterday’s Hub guest blog by Robert Kepes: Budget closes two life insurance planning strategies.

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Jamie Golombek

Little good news for the wealthy

In today’s Financial Post, CIBC Wealth’s Jamie Golombek also provides a fine overview of the Budget’s impact on the wealthy.

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The Big Red “Soak the Rich” Budget

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Depositphotos_1830058_s-2015My low expectations for Budget2016 apparently weren’t low enough, with a sea of red ink projected as far as the eye can see. Spending, spending everywhere. Not that we should be surprised: the die was cast with the election, this is merely the other shoe dropping.

In this article by Garry Marr, the Financial Post aptly describes it as a “Soak the Rich” Budget. It quotes CIBC Wealth’s Jamie Golombek to the effect “the government is taking away some key tax planning vehicles that allow the wealthy to rebalance their portfolios without incurring a deemed disposition, meaning they will face immediate tax consequences.” As of October 1st, there will no longer be tax-free switches for those in corporate class mutual funds.

And the return of a 15% federal tax credit for Labor-Sponsored Investment Funds is hardly any consolation!

As expected, income splitting for couples with kids under 18 will be eliminated but fortunately, pension splitting remains intact. (sigh of relief!)

Capital gains tax inclusion rate still at 50%

As for the rumoured  sweeping changes to capital gains taxes, you’ll need to dig into the supplementary budget documents that are aimed at measures for those in the new 33% tax bracket. We will update this paragraph as it becomes more clear but based on this report today by Advisor.ca, the capital gains inclusion rate remains at 50% and won’t rise to the feared 67 or even 75%.

GIS sweetened for low-income seniors and couples living apart

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“Top 10” Early Tax Planning Tips for 2016

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David Rotfleisch

By David Rotfleisch

Special to the Financial Independence Hub

While tax season for calendar 2015 is just around the corner, the best time to influence your tax position for calendar 2016 is: right now. Here are the “Top 10” early tax planning tips for 2016 to help reduce your tax, contribute to your RRSP, help out family members, and also support your favourite charities.

  1. Adjust Source Deduction amounts

Salaried employees have income tax deducted by their employers from each pay cheque. The amount of these deductions is computed on the assumption that the employee is only entitled to the basic personal exemption. Taxpayers with other exemptions such as children can fill out and give their employers a CRA form TD-1 http://www.cra-arc.gc.ca/E/pbg/tf/td1/README.html showing other deductions to which they are entitled, thereby reducing the amount of taxes that will be deducted at source. For deductions that don’t appear on the TD-1 form, such as spousal support payments or RRSP contributions, form T1213 Request to Reduce Tax Deductions at Source http://www.cra-arc.gc.ca/E/pbg/tf/t1213/README.html can be submitted to CRA.

  1. Contribute to an RRSP as Soon as Possible

While many Canadians contribute to their RRSPs in the first 60 days of the year, the earlier the contribution is made, the more the RRSP benefits from the effects of compounding. If you don’t have a lump sum to make your annual contribution at the start of the year, consider making regular monthly payments. The RRSP limit for 2016 is the lesser of 18 per cent of 2015 earned income or $25,370.

  1. Income Splitting

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