The Family Tax Cut is a new income splitting measure introduced by the Federal government on October 30, 2014. Eligible families can start to claim the Family Tax Cut as a non-refundable federal tax credit in the spring of 2015 when they file their 2014 tax returns. Since this is only a federal tax credit, there is no impact on the provincial tax calculation.
Who will benefit from the Family Tax Cut?
The Family Tax Cut is an income splitting measure for providing relief to couples with one or more children under the age of 18 at the end of the year.
How much is the tax benefit of the Family Tax Cut?
To claim the credit, each spouse must file a tax return and needs to calculate their federal taxes twice. The first calculations will be based on the normal rules. The second calculations will be based on the assumption that up to $50,000 of income is transferred from the higher income spouse to the lower income spouse. If the combined federal tax under the second calculation is lower than the combined federal tax under the first calculation, either spouse is allowed to claim a federal non-refundable tax credit for the difference. However, the maximum allowable credit (i.e., tax benefit) is capped at $2,000.
We Can Help
We are a Toronto Chartered Accountant firm with 20 years of specialized experience in Canadian domestic and international taxation. We can assist with
- Cross border taxation;
- Business and succession planning;
- Canadian personal and corporate tax returns;
- Corporate tax planning and reorganization;
- Retirement planning;
- Estate planning and inheritance tax advice; and
- Tax audit dispute and resolution.
The information in this article is general in nature and does not constitute professional advice. We recommend that you obtain the appropriate professional advice before acting on any of the information contained herein.