With the top marginal personal tax rate exceeding 50 per cent in more than half the provinces in Canada, it’s no surprise that some taxpayers are looking at ways to income split with a spouse or common-law partner. In a province like Ontario, where the top marginal tax rate is 53.5 per cent and the bottom rate is 20 per cent, that’s a spread of over 33 per cent.

There are a variety of ways to legally split your income with a spouse. They range from straightforward strategies, like pension income splitting or CPP/QPP sharing, to more sophisticated strategies such as using a prescribed rate spousal loan to have any excess returns above the prescribed interest rate (currently holding at two per cent) taxed in the hands of the lower-income spouse.

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