A practical example for small business owner saving taxes with income splitting
Mr Li runs a small unincorporated business in Ottawa, Ontario. His business net income is $88,888. His wife does not have a job and no any income. In 2013 income tax return, Mr Li pays $25,700 income taxes (including $4,712 in CPP contributions for self-employment).
If Mr Li paid a salary of $40,000 to his wife, his net business income would be reduced to $48,888. As a result, Li?s tax bill would be $12,204
Every year millions of Canadians pay more tax than they should. They either don’t file their returns to their family’s best advantage or they leave valuable credits and deductions on the table. Even worse, they don’t file at all and face unnecessary penalties.
Here are some ways to make sure the tax system works to your advantage:
1. File as a family. When it comes to getting the best return for your family unit, it is important to file all returns together. There are three simple steps:
• Prepare
Follow