What is Income Splitting?

As your personal income rises, so does the tax rate on your income. If your spouse or children pay tax at a lower rate than you, shifting income to them could help you to pay less tax overall. There are many legitimate income splitting strategies—and plenty of rules and regulations as well—so be sure to talk to your financial planner and a tax advisor first.

Two Popular Income Splitting Strategies

Expense Funding Strategy
  • The higher income spouse pays all household expenses
  • The lower income spouse invests as much as possible of their own income
  • With this strategy, the investment income will be taxed at the marginal rate of the lower income spouse
Spousal RRSP Strategy
  • The higher income spouse contributes to the lower-income spouse’s RRSP
  • The spouse making the contribution claims in on their tax return, reducing their taxable income
  • The goal is to contribute until the planned retirement income of both spouses is about the same

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What is Financial Planning?

RBC Financial Planning is a business name used by Royal Mutual Funds Inc. (RMFI). Financial planning services and investment advice are provided by RMFI. RMFI, RBC Global Asset Management Inc., Royal Bank of Canada, Royal Trust Corporation of Canada and The Royal Trust Company are separate corporate entities which are affiliated. RMFI is licensed as a financial services firm in the province of Quebec.

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