Personal Finance

Income Splitting.... How that is good!!

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  • Jan 31st, 2015 11:00 am
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Jr. Member
Aug 14, 2007
183 posts
109 upvotes
Burnaby, BC
_dc_ wrote: Income splitting is an unfortunate misnomer for this tax credit. The actual name is the Family Tax Cut. The important thing is that there is no actual splitting of income, it is a notional transfer of income for calculation of the credit only. You will still be able to claim unused spousal amounts just like before. However, the calculation of the credit will assign credits to each spouse accordingly.

Basically, what happens is you calculate your income normally as though there is no split happening, claim all credits including the unused spousal amounts, and come up with your total federal tax payable.

Next, you calculate your combined total federal tax payable between you and your spouse if you were to split up to $50,000 of income, using appropriate credits for each of you.

The difference between the two amounts is your tax credit (up to $2,000).

Read about the Family Tax Cut here: http://www.fin.gc.ca/n14/data/14-155_1-eng.asp
You can use the tax calculator at TaxTips.ca to estimate your taxes here: http://www.taxtips.ca/calculators/canad ... ulator.htm
Thanks for the clarification and the links. Finally understand how it works.
Deal Addict
Jan 7, 2014
2721 posts
549 upvotes
Manitoba
Rhaegar wrote: "Homemaking" is bullsh$t. The only reasonable excuse to stay at home and not work is for child care, and even then I think it would be better for all kids if there were affordable childcare centers available to all instead.

Nobody (husband or wife) needs to be at home full time cleaning and cooking, etc i.e "homemaking".

Rhaegar wrote: I'd expect this is one of those topics where extremely biased studies exist all over the place on both sides of the discussion. Obviously a lot depends on what the parents are doing as well as the type and quality of daycare.

My son was in a home daycare from age 1-2 run by a person who we had great referrals to by people we trust. He did great there and loved it. I have several co-workers with home daycare horror stories on the other hand (including one who's kid was verbally/physically abused).

Now we have him in a center that I went to as a kid and is run by a friend of my mom. He's doing great there as well and his verbal skills development has skyrocketed.

For me personally, looking back at my childhood, going to daycare did a world of good for me and likely compensated for a lot of other negative things going on at home (parents divorced when I was 2).

I'm sure there are lots of great parents who can do as good or a better job than a daycare, but there are also lots of bad parents out there and for those kids a daycare may very well be their salvation from an otherwise negative home life.
You are entitled to your opinion and I mean no offense but the advocates of child care should understand that it is a compulsion to send your child to day care to be raised by strangers and not a wish that any mother would naturally have. Where were the day cares before the industrial revolution? The society has been turned in such a way that the economics now a days require that both of the parents work. There are a few people with "old school" thought like me who are swimming against the current . Following are the reasons .
Humans are not 100 years old .... they are 1000s or even more. The day care centers are like what ..50 or 100 year old business I guess ... To people like me , it is indeed a cruelty to leave the kids of below 1 year or 2 or 3 years to that matter to the strangers. They cry for hours and hours for the first few days. Has some "day care" advocate done that analysis as to what they go through in those times... Let me tell you .... ofcourse they can't speak but if they could.. they would say ..... " Why mom , what is so important than me so that you are leaving me here...How should I live without you"... and then... because of the survival instinct that the human has got, they just adjust to the reality... no mom for the day.....

So pls... don't give reasons that day care is good and all.... and then you go ahead and say that " it is salvation for those kids who are abused at home by parents"....may be yes, but that argument can't hold any weight for caring parents to send their own kid to day care...

In plain English, sending your little kids to day care is a compulsion in order to earn more money ...nothing more nothing less.. But I respect that. It is forced by the society in a way as modern economics wouldn't let the women stay at home so easily.

For me.. I am happy by this tax brake move as I get best of both worlds... A quality day care for my kid at home by mother which not even the most expensive day care can provide.... and 2000 CAD in my investment account per year.. :D ( of course until another govt comes in and change the rules )
Deal Addict
Jan 7, 2014
2721 posts
549 upvotes
Manitoba
mpt wrote: Has it been confirmed
What are you looking to be confirmed? Sorry I didn't go through the entire thread but if you want to know when the Family tax cut will be paid. It is in 2014 tax season so when you file the tax before April 2015, look for that additional refund of up to 2000 CAD ( based upon your income splitting) and as many others said, it is not a real income that you need to transfer or something. The tax software will do the calculation and give the result as to how much you will get. Hope it helps...
Deal Addict
Jan 2, 2015
1633 posts
638 upvotes
Toronto, ON
This is new, but there's been something similar for years: pension splitting, which lets a married or common-law couple split their private pension income. The only limit is no more than 50% of the income can be transferred from one spouse to another. Generally this means the lower-income spouse owes some money but the higher-income spouse gets a much larger refund.

You can't split CPP or OAS this way, but I think you can have Service Canada split that for you, for tax purposes, of course.
Deal Addict
Mar 8, 2013
2948 posts
1611 upvotes
Rhaegar wrote: It's not a subsidy to tax dual income families the normal amount. A subsidy is providing blanket tax cuts to anyone who happens to have a non working spouse at home for whatever reason (that includes trophy wives for rich people).

The normal situation in our society is for both able bodied adults to be working and paying taxes. We should not be subsidizing people to not work.
It may be 'normal' now but it was not in the past. I am very happy that my wife has a career, but in the previous generations the woman worked just as hard as the man, but at home, raising children, making a home, etc. I don't think that society has advanced by requiring both adults to travel to work, cluttering roads and public transit, and shuffling off children to day cares.
Deal Addict
Jan 2, 2015
1633 posts
638 upvotes
Toronto, ON
nabilbb wrote: This is a good point. that would be useless split if I can't claim the spousal amount (11K)

any idea about this?
I'm not seeing anything preventing you from claiming the spousal amount as well.

There's a wide variety of tax credits that depend on your marital status and number of children. The amount for children (line 367), which will vanish in the 2015 tax year, gives you a tax credit per child, and doesn't depend on your marital status. The amount for a dependent (line 305) gives you a (usually) larger tax credit for a dependent, but you must be single to claim it. The spousal credit (line 303) gives you a (usually) larger tax credit, but you must be common-law or married. (It's technically the same size as the dependent credit, but usually gives less, as low-income spouses don't always have an income of 0, plus the lower-income spouse claims the UCCB.) And now this tax credit can only be claimed if you're married/common-law and have children.
Deal Addict
Jul 27, 2006
1113 posts
824 upvotes
Moncton
This issue seems to bring out a lot of bitterness in some people. A good part of this seems to be based on ignorance of our tax system and opinions based mostly on the political talking heads - but the Conservatives are also partly to blame for the lousy job they have done promoting this.

A lot of couples have different income levels for many reasons - a stay at home parent is just one example. Another common situation is where both spouses work full-time, but one makes significantly more than the other.

This program just helps correct an inequality in the current tax system in which a couple making $70K and $30K pay significantly more tax than a couple who make $50K each.

How is it fair that these two couples (each with the same combined family income of $100K) don't pay the same amount of total tax?
Deal Expert
Oct 7, 2010
15501 posts
5768 upvotes
oIIIIIo wrote: This issue seems to bring out a lot of bitterness in some people. A good part of this seems to be based on ignorance of our tax system and opinions based mostly on the political talking heads - but the Conservatives are also partly to blame for the lousy job they have done promoting this.

A lot of couples have different income levels for many reasons - a stay at home parent is just one example. Another common situation is where both spouses work full-time, but one makes significantly more than the other.

This program just helps correct an inequality in the current tax system in which a couple making $70K and $30K pay significantly more tax than a couple who make $50K each.

How is it fair that these two couples (each with the same combined family income of $100K) don't pay the same amount of total tax?
Let's just say canadian born and grown is a bunch of brainwashed spoiled kids. Dual income mean less time for your kids, since that few hours after work doesn't help bond with their kids much. It is borderline child neglect. Then again, we are a bunch of self serving righteous individuals who think $ is everything.

By Harper making this tax break, it benefit the tradition type of family who has only one bread winner. It is really unfair to penalize a father making 100k with a stay at home wife taking care of the child VS a couple who makes 50k each and combine into 100k. Then all this jealousy of saying the single income is rich, hence he shouldnt get the tax break. The couple should think more why they aren't smart or skilled enough to pull 100k. Then again, we are a bunch of self serving whiners. Instead of wasting time complaining, concentrate to make more money with that time.

More over, the single income is more a thing out west than east Canada. Not to mention there aren't many good paying jobs around, time for mom to quit and let the youth of today to have these jobs. Mom can stay home to care for your own child instead of dumping the kid with a bsby sitter.
Deal Addict
Jul 27, 2006
1113 posts
824 upvotes
Moncton
spike1128 wrote: By Harper making this tax break, it benefit the tradition type of family who has only one bread winner...
I think framing this program as a benefit primarily for single income families gives ammunition to the anti-Conservative crowd who already associate the program with a Conservative social engineering agenda.

I suspect there is a larger number of families with dissimilar income levels that will benefit from this program - but that gets drowned out in the political rhetoric.
Sr. Member
Feb 7, 2004
590 posts
425 upvotes
St Thomas
I'm one of the people that will maximize the family tax cut. I hope they increase the cap next year too. It makes no sense why all other credits and benefits are based off a family income, yet we are taxed individually.
Deal Expert
Oct 7, 2010
15501 posts
5768 upvotes
oIIIIIo wrote: I think framing this program as a benefit primarily for single income families gives ammunition to the anti-Conservative crowd who already associate the program with a Conservative social engineering agenda.

I suspect there is a larger number of families with dissimilar income levels that will benefit from this program - but that gets drowned out in the political rhetoric.
Traditionally I would not vote Tories. But he seem to be doing better than the liberal for certain policies. Immigration and tax reforms are great, the TFW program pisses on all of us. So if Trudeau is promising and signing a contract to say he get rid of the TFW program, he got my vote. If not, have to vote Harper even if i am traditionally left central leaning.
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Dec 11, 2005
20123 posts
2949 upvotes
oIIIIIo wrote: This issue seems to bring out a lot of bitterness in some people. A good part of this seems to be based on ignorance of our tax system and opinions based mostly on the political talking heads - but the Conservatives are also partly to blame for the lousy job they have done promoting this.

A lot of couples have different income levels for many reasons - a stay at home parent is just one example. Another common situation is where both spouses work full-time, but one makes significantly more than the other.

This program just helps correct an inequality in the current tax system in which a couple making $70K and $30K pay significantly more tax than a couple who make $50K each.

How is it fair that these two couples (each with the same combined family income of $100K) don't pay the same amount of total tax?
Tax policy is not supposed to be about what is "fair" for inidividuals, it is what is supposed to be "fair" for society. This tax break will not benefit the majority of working families to any degree. The people it will benefit most are higher income earners, the top 10% in Canada - this is a fact, it is simple math anyone can do.

Middle class income earners, the type where both parents have to work at minimum wage jobs or close to it just to keep the mortgage, will not benefit from this one iota because their incomes are too simmilar. And parents where there is only one working person making 60K-70K and the other staying home will get a VERY SMALL benefit on the order of a couple of hundred bucks a year. And the poor definitely won't benefit at all because they are already hardly taxed.

The reason it brings out bitterness is because of this.. this policy will cost Canada about 2.5 billion dollars a year - that's billion with a B - for another tax break for the 10%. Those billion dollars could be spent in many much better ways to help income inequality, like funding child care programs for lower and middle income families.

And for the record, I live in the 10% and stand to benefit greatly from this policy. But I also know what a crock it is.
To be nobody but yourself - in a world which is doing its best, night and day, to make you everybody else - means to fight the hardest battle which any human being can fight; and never stop fighting. -- E. E. Cummings
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Oct 26, 2003
39290 posts
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Winnipeg
^why does tax policy have to be so complicated? it changes every bloody year and it takes a team of expert to figure it out
Sr. Member
Jun 1, 2006
573 posts
99 upvotes
NB
i agree w you - & don't forget that single income earner prob has worked harder to get to that salary (eg.- # of yrs of schooling, working up the ladder, accum. more debt from student loans etc....)

only in canada would we even whine about tax breaks..........im all for them (whether they affect me personally or not).
spike1128 wrote: Let's just say canadian born and grown is a bunch of brainwashed spoiled kids. Dual income mean less time for your kids, since that few hours after work doesn't help bond with their kids much. It is borderline child neglect. Then again, we are a bunch of self serving righteous individuals who think $ is everything.

By Harper making this tax break, it benefit the tradition type of family who has only one bread winner. It is really unfair to penalize a father making 100k with a stay at home wife taking care of the child VS a couple who makes 50k each and combine into 100k. Then all this jealousy of saying the single income is rich, hence he shouldnt get the tax break. The couple should think more why they aren't smart or skilled enough to pull 100k. Then again, we are a bunch of self serving whiners. Instead of wasting time complaining, concentrate to make more money with that time.

More over, the single income is more a thing out west than east Canada. Not to mention there aren't many good paying jobs around, time for mom to quit and let the youth of today to have these jobs. Mom can stay home to care for your own child instead of dumping the kid with a bsby sitter.
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Jan 2, 2012
4585 posts
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Toronto
Seems to be a lot of misconceptions on what income splitting actually is. As other's mentioned, the income splitting is NOT actually happening. It is a hypothetical/theoretical situation only, in which a "fake" or "dummy" tax return is run under assumption of up to $50K of split income. This hypothetical/theoretical result is then used only to calculate how much of the $2000 credit you are entitled to.

For doing your actual/real taxes, there is no income splitting involved, and RRSP, tuition, etc rules are followed as per your actual incomes.

brunes wrote: And parents where there is only one working person making 60K-70K and the other staying home will get a VERY SMALL benefit on the order of a couple of hundred bucks a year.
Actually I think the number is closer to $40,000 earned by 1 spouse, while other spouse stays home, that will result in full $2000 benefit (unless my calcs below are off).
i.e. using https://simpletax.ca/calculator for Ontario
$40K per year tax owed = $5,861
$20K x 2 per year tax owed = $1,851 x 2 = $3,702
5861 - 3702 = 2159 = max $2000 credit.

For my family, our first child was born in Dec and wife is stay at home, so we just qualified and will get the full $2K benefit right away. Personally it's great for us (Harper is basically funding our kids RESP), but I can definitely also see the other point of view that to society as a whole it would be better if some of that money was distributed to families that don't qualify for this (single parents, or those with 2 similar low incomes).
Deal Addict
Sep 5, 2010
2352 posts
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Toronto
Rhaegar wrote: Income splitting is just an attempt at social engineering to encourage women to stay at home with the kids "where they belong".
It is funny you mention that because I have seen so many families in the past, who wished something like this existed, so they can actually stay home and care for their kids.

So it goes both ways....
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Oct 26, 2003
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sounds like the calculation is complicated since few of you kept coming up with different numbers
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Luckyinfil wrote: Regardless of whether it is better for the child to go to daycare or not, income splitting is an equalization tool. Those who it doesn't apply to are in no way worse than they were the day before.
Great points! Although liberals and NDPs are trying to make it seem like it is some 'war on single people' ' war on LGBT community' and anything stupid they can come up with just to make vote against the conservatives.
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rob444 wrote:
Actually I think the number is closer to $40,000 earned by 1 spouse, while other spouse stays home, that will result in full $2000 benefit (unless my calcs below are off).
i.e. using https://simpletax.ca/calculator for Ontario
$40K per year tax owed = $5,861
$20K x 2 per year tax owed = $1,851 x 2 = $3,702
5861 - 3702 = 2159 = max $2000 credit.

For my family, our first child was born in Dec and wife is stay at home, so we just qualified and will get the full $2K benefit right away. Personally it's great for us (Harper is basically funding our kids RESP), but I can definitely also see the other point of view that to society as a whole it would be better if some of that money was distributed to families that don't qualify for this (single parents, or those with 2 similar low incomes).
I'm sorry but your math is likely off, likely because you are bit taking into account your other tax breaks. In your decile the average tax cut is around $900.

The simple truth is 60% of Canadian families will see a average tax break of $50 or less. While the top 5% will get an average break of $1000 or more (top 1% at $6500). Its a tax break for the rich subsidized by the poor, again. Its totally backwards policy from what we should be doing.

I suggest reading here for more details.

http://www.taxfairness.ca/en/news/incom ... h-families
To be nobody but yourself - in a world which is doing its best, night and day, to make you everybody else - means to fight the hardest battle which any human being can fight; and never stop fighting. -- E. E. Cummings
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Woodbridge905 wrote: Great points! Although liberals and NDPs are trying to make it seem like it is some 'war on single people' ' war on LGBT community' and anything stupid they can come up with just to make vote against the conservatives.
funny thing is that if the conservatives didn't come up with it, the liberals and ndp would support it, overall with cap at $2000, it is not a major issue

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