Take time to understand the Family Tax Cut

“Making sense of the family tax cut (also called income splitting) means taking the time to understand what it really is” says Scott Klein, CPA, CA, LPA, from Millards Professional Chartered Accountants in Brantford, Ontario. On October 30, 2014, Prime Minister Stephen Harper announced personal tax changes with respect to families. These changes were passed into law on December 16, 2014 and offer new savings to those who qualify.

“The family Tax Cut is actually a non-refundable federal tax credit and it’s worth up to $2,000. The tax cut will have the most impact on families where the parents are in different tax brackets.”

The Family Tax Cut was first eligible on 2014 personal tax returns and is a new non-refundable credit.

“Essentially, you get a Federal tax credit intended to simulate the annual Federal tax benefit of income splitting with a lower income spouse to a maximum transfer of $50,000 and a maximum tax benefit of $2,000.”

To be eligible for the credit, you must meet all of the following criteria:

Be married (including common-law partners) to a Canadian resident at the end of the year
Have a child under age 18 who resides with you
Not make a pension splitting election (either spouse)
File a return (both spouses)
Be resident in Canada
Not become bankrupt in the year
Not be incarcerated for a 90 plus day period in the year

If you have any questions about the Family Tax cut, please contact a Millards Professional Chartered Accountants office near you. We look forward to helping you understand and benefit from knowing Canada’s tax law.

Scott Klein’s Practice Areas: