Income splitting is a tax strategy by which you transfer part of your income to another person taxed at a lower tax bracket.

It is important to understand that the Canadian tax system was conceived in such a manner so as to encourage all taxpayers to earn income. It is therefore more advantageous from a tax perspective to have two people split a given amount of revenue than to have all of that revenue taxed in the hands of a single individual. However, recent tax reforms have placed various limitations on these tax strategies. 


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