Are you confused about the family tax cut? Do you want to know the facts and myths? Read this blog to find out how the family tax cut can benefit you in this tax season
Ever since the family tax cut was announced in October of 2014, there have been numerous confusions by the general public. Let’s take a look at the major myths surrounding it.
What is the Family Tax Cut?
The family tax cut is a non-refundable credit for a maximum of $2000 for married couples with children under the age of 18. This credit effectively allows the higher-earning income spouse to transfer up to $50,000 of income to the other spouse.
The Top 5 Myths
Myth #1: The family tax cut allows you to split income with your children. This is entirely false, you can only split income with the family tax cut with another spouse.
Myth #2: You will save tax on the full $50,000 of income transferred. This is false, the maximum credit allowable is $2,000 to the transferring spouse
Myth #3: – The family tax cut is a temporary measure enacted to stimulate the economy. This is also false, there is no indication from the Federal Government that the family tax cut is temporary so you can expect it for a number of tax years to come
Myth #4: The family tax cut only applies to married couples with children. This is false, common-law couples with children can also claim this credit so long as they were not living apart for more than 90 days at the end of the year
Myth #5: The family tax cut can only be accessed by submitting an application to Service Canada. You can access the family tax cut by completing your T1 Personal Tax Return along with Schedule 1A
So Here’s the Tip:
Do not fall victim to these common myths, check with your accountant to see if you qualify for the family tax cut. If you want to learn more about other income splitting methods, please take a look at this article on income splitting with a spouse and income splitting with your children.
The information provided on this page is intended to provide general information. The information does not take into account your personal situation and is not intended to be used without consultation from accounting and financial professionals. Allan Madan and Madan Chartered Accountant will not be held liable for any problems that arise from the usage of the information provided on this page.