Overview
The **family tax cut credit** is a valuable financial provision designed to reduce the tax burden on families, offering significant savings by adjusting taxable income or providing direct credits. Understanding its nuances is key to maximizing your household’s financial well-being.
This overview provides a concise summary of the credit’s main aspects, helping you navigate its benefits and requirements effectively.
- Definition: The family tax cut credit primarily aims to support households by reducing their overall tax liability, often through deductions or direct credits based on family size and income.
- Eligibility: Eligibility for this credit typically depends on factors such as income thresholds, the number of dependents, and specific family structures, as detailed in our comprehensive guide.
- Benefits: Families can experience substantial financial relief, freeing up funds for essential expenses or savings.
- Application: Claiming the credit usually involves completing specific forms during tax filing, requiring accurate reporting of income and family information.
KWB’s Guide to the Family Tax Cut Credit
Prime Minister Stephen Harper and Finance Minister Joe Oliver recently announced a “Family Tax Cut” credit which allows certain Canadian families to reduce their overall federal income tax. This relief will be available starting in 2014.
The new measure would allow a higher income spouse to shift a portion of their income to a lower income spouse in order to take advantage of their spouse’s lower marginal tax rate and non-refundable tax credits. This will be of benefit to those families where one spouse is earning the majority of the income.
In order to prevent certain individuals from getting a disproportionate benefit, the maximum amount of income which can be split is limited to $50,000 annually. The tax benefit which can be achieved will be limited to $2,000 per year in the form of a non-refundable federal tax credit.
In order to take advantage of this new measure:
- The taxpayers must be residents of Canada and married or living in a common-law relationship; and
- The couple must have at least one dependent child under the age of 18 at the end of the year.
This income splitting measure applies only to the federal portion of tax but hopefully the provincial governments will follow suit and introduce a similar measure.
This new provision will not impact the pension income splitting currently available to seniors. However, the two income splitting measures cannot be claimed at the same time.
For more detailed information please call KWB at 780-466-6204 or email us by clicking here.
Thanks to Richard Ouellette of KWB Chartered Accountants for providing this content.