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Income splitting strategies can lower your family's taxes: CIBC's Jamie Golombek

Family Tax Cut credit adds to income splitting options Canadians can use to save tax

TORONTO, March 31, 2015 /CNW/ - While the new Family Tax Cut credit has attracted a lot of attention since its introduction last year, there are other potentially better income splitting strategies that have been around a lot longer and provide much more significant tax savings for your family, finds a new CIBC (TSX: CM) (NYSE: CM) report by wealth advisory expert Jamie Golombek.

"With marginal tax rates for high-income earners approaching 50 per cent in several provinces, now is a great time to revisit income splitting strategies," says Mr. Golombek, Managing Director, Tax and Estate Planning, CIBC Wealth Advisory Services.

In his report, The Great Divide: Income Splitting Strategies Can Lower Your Family's Taxes, he points out that the "attribution rules" in Canada's Income Tax Act make it difficult for high-income earners to simply hand income to lower-income family members for them to report on their tax returns. "However, there are a number of strategies available to families that can reduce your tax bill," he says.

The report describes in detail the following income splitting strategies:

Family Tax Cut credit
The Family Tax Cut credit can be claimed for the first time for the 2014 taxation year. The credit provides a version of income splitting that allows you to notionally transfer up to $50,000 of income to your lower-income spouse (or partner) provided you have a child who was under 18 at the end of the year. The maximum benefit, however, is capped at $2,000.

Pension splitting
You can split up to half of your pension income with your spouse. Any pension income that qualifies for the $2,000 federal pension income credit qualifies to be split.

Spousal RRSPs (RRIFs)
Spousal RRSPs can be an effective method of income splitting in retirement for those who expect to have a higher income or have accumulated more retirement assets than their spouse.

Higher-income earner pays all expenses
The higher-income earning spouse pays all the household expenses, while the lower-income earner does all the non-registered investing.

Spousal loan and loan to a family trust
Spousal loans are exceptionally attractive now since the prescribed interest rate is currently at a historic low of 1% (which is the lowest rate possible) until at least June 30, 2015. The spousal loan strategy can be expanded to help fund expenses for your children if you make a prescribed rate loan to a family trust.

Put your family members to work
If you own a business, hiring your spouse or children to work for you can be a great way to income split. The result could be thousands of dollars of annual tax savings.

"Income splitting can reduce the overall tax burden for the family", says Mr. Golombek. "There are a number of strategies available, so speak to your tax and financial advisors to determine which ones are right for your family."

The full report is available at:

About CIBC
CIBC is a leading Canadian-based global financial institution with nearly 11 million personal banking and business clients. Through our three major business units - Retail and Business Banking, Wealth Management and Wholesale Banking - CIBC offers a full range of products and services through its comprehensive electronic banking network, branches and offices across Canada with offices in the United States and around the world. You can find other news releases and information about CIBC in our Media Centre on our corporate website at

SOURCE Canadian Imperial Bank of Commerce

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