dave@lsuc.UUCP (03/30/87)
As you probably know, individual income tax in Canada runs at progressive rates, meaning that the tax on the last dollar earned rises as income rises. The top personal rate in 1986 was about 55% in Ontario (it varies from one province to another); for 1987, it's about 52.5%. Because of the progressive rates, a single income of, say, $50,000 is taxed much more heavily than two $25,000 incomes. (There is no joint filing for spouses in Canada, as there is in the U.S.) This provides an incentive for "income splitting", that is, splitting a taxpayer's income within a family group to reduce tax. The Income Tax Act has a system of attribution set up to prevent certain kinds of income splitting. For example, if the husband is the sole earner in the family, and he gives or lends his wife $50,000 which she invests at (say) 10%, the $5,000 interest income is attributed back to him and taxed as part of his income (normally at a higher rate) rather than hers. Certain options for income splitting are available, however. If you are self-employed (e.g., as a consultant), it may be possible to pay your spouse or other family members for services performed. For investment income splitting in a two-income family with disparate incomes, the spouse with the higher income should pay all personal expenses while the spouse with the lower income should invest. There are other possiblities too, which depend on your circumstances -- consult your tax advisor. David Sherman, Consultant The Law Society of Upper Canada Toronto -- { seismo!mnetor cbosgd!utgpu watmath decvax!utcsri ihnp4!utzoo } !lsuc!dave