Income Splitting & Family Tax Planning
Reduce Your Household Taxes with Strategic Income Splitting
Income splitting is a powerful tax strategy that allows families to redistribute taxable income between spouses, children, or other family members to reduce overall tax liability. Since Canada has a progressive tax system, shifting income from a higher-earning family member to a lower-earning one can result in lower tax rates and increased tax savings.
At Westview Accounting & Tax Services Inc., we help families in North Vancouver, BC, implement legal and effective income-splitting strategies to optimize tax efficiency and maximize government benefits.
What is income splitting?
Income splitting involves shifting taxable income from a high-income family member to a lower-income family member, allowing the income to be taxed at a lower rate. Since Canada uses a graduated tax system, lower-income individuals pay a lower percentage of their income in taxes, creating an opportunity for household tax savings.
While direct income transfers between family members are not allowed by the CRA, there are legal income-splitting methods available.
Legal Income-Splitting Strategies to Reduce Taxes
Spousal RRSP Contributions (T1032)
A higher-earning spouse can contribute to a spousal RRSP, shifting retirement savings to the lower-earning spouse.
This allows for lower tax rates on withdrawals in retirement.
Pension Income Splitting (T1032)
Retirees can split up to 50% of eligible pension income with their spouse.
This strategy helps reduce OAS clawbacks and overall family tax rates.
Dividend Income Splitting (T5)
Business owners can pay dividends to a spouse or adult children (within reason) to reduce tax burdens.
The recipient must own shares and be actively involved in the business to comply with CRA’s Tax on Split Income (TOSI) rules.
Prescribed Rate Loans (T1 Line 12100)
A high-income spouse can loan money to a lower-income spouse or family trust at the CRA’s prescribed interest rate.
This allows investment income to be taxed at a lower rate.
Hiring Family Members for a Business (T2125)
If you own a business, you can hire your spouse or children and pay them a reasonable salary.
The wages must be reasonable for the work performed to comply with CRA rules.
Registered Education Savings Plan (RESP) Contributions
Instead of transferring funds directly, parents can contribute to an RESP for their children.
The Canada Education Savings Grant (CESG) provides up to $500 per year per child.
Transferring Tax Credits Between Spouses
Unused tax credits (e.g., disability tax credit, tuition credits, medical expenses) can be transferred to a spouse to reduce taxable income.
Family Trusts for Wealth Management
High-income earners can create a family trust to shift investment income to lower-income family members.
Trusts require careful planning to comply with CRA tax laws.
Who Can Benefit from Income Splitting?
Married or Common-Law Couples with Unequal Incomes
Shifting income to a lower-earning spouse can reduce the overall household tax bill.
Retirees Looking to Reduce Taxes on Pension Income
Pension splitting can lower taxable income and avoid OAS clawbacks.
Self-Employed Individuals & Business Owners
Paying family members a salary or dividends can legally redistribute income.
Parents Saving for Their Children’s Education
RESP contributions allow for government matching grants while keeping funds tax-efficient.
High-Net-Worth Individuals Seeking Long-Term Tax Savings
Family trusts and prescribed rate loans minimize tax burdens on investments.
TIP: Proper tax planning can result in significant savings and improved cash flow for the entire family.
Who Can Benefit from Income Splitting?
Married or Common-Law Couples with Unequal Incomes
Shifting income to a lower-earning spouse can reduce the overall household tax bill.
Retirees Looking to Reduce Taxes on Pension Income
Pension splitting can lower taxable income and avoid OAS clawbacks.
Self-Employed Individuals & Business Owners
Paying family members a salary or dividends can legally redistribute income.
Parents Saving for Their Children’s Education
RESP contributions allow for government matching grants while keeping funds tax-efficient.
High-Net-Worth Individuals Seeking Long-Term Tax Savings
Family trusts and prescribed rate loans minimize tax burdens on investments.
TIP: Proper tax planning can result in significant savings and improved cash flow for the entire family.
How Westview Helps Families with
Income Splitting & Tax Planning
How Westview Helps Families with Income Splitting & Tax Planning
Customized Income-Splitting Strategies
We assess your financial situation to create a personalized tax-saving plan.
Legal Compliance with CRA Rules
We ensure all income-splitting methods comply with CRA’s tax rules, avoiding penalties.
Maximizing Pension & Retirement Income Splitting
We structure pension income efficiently to minimize taxes and maximize savings.
Business Owner Tax Optimization
We help self-employed individuals pay family members tax-efficiently and legally.
Wealth Transfer & Family Trust Planning
For high-income earners, we develop long-term income-splitting strategies for wealth preservation.
Why Work with Westview Accounting & Tax Services Inc.?
At Westview Accounting & Tax Services Inc., we combine deep expertise with personalized service. Our team takes the time to understand your unique financial situation and offers tailored advice to ensure your return is accurate, compliant, and optimized for maximum refunds. We don’t just file your taxes—we help you plan smarter for the future. Whether you’re a newcomer, business owner, or retiree, you can trust us for clear guidance, strategic savings, and peace of mind all year long.
Experienced accountants
Transparent, upfront pricing
Professional review of all tax documents
Personalized advice for your financial goals
Convenient online or in-person filing options
Reduce Your Family’s Taxes with
Smart Income Splitting!
Reduce Your Family’s Taxes with Smart Income Splitting!
Income splitting can be a game-changer for lowering household taxes, but it must be done correctly to avoid CRA penalties. Let Westview Accounting & Tax Services Inc. help you legally shift income, maximize family tax benefits, and keep more money in your household in North Vancouver, BC.
Contact Us Today! Get expert income-splitting & family tax planning services!
Westview Accounting provides trusted accounting, tax, and bookkeeping services across North Vancouver and Surrey. We help individuals and businesses stay compliant, informed, and financially confident.