Income Splitting Techniques

Unlike the United States, taxes can’t be filed jointly.  Instead, Canadians must use other techniques to split income when one spouse outearns the other.  Here are the most common methods:


One high earning spouse can make deposits into the RRSP of the lower earning spouse.  This has ramifications for divorce, so be sure that you have that angle covered.


The lower earning spouse can do the investing, which means that any investment income can be folded into their tax return at a lower rate.


If one member owns a small business, some of the business earnings can be sent to the other in the form of salary.

Family Trust

An advanced form of income splitting where there is company revenue involved involves setting up a family trust with one family member as the trustee.  Any funds that arrive in the trust can be disbursed to any person that is a beneficiary of the trust and the income will be treated as their own, under their own tax rate.

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