I understand Turbo Tax is designed to enable income splitting between couples. How is this done?

How can couples income split using Turbo Tax under new rules?

Answer

3 people found this helpful

It is done on Schedule 1A.  However, there is a certain criteria that you must meet before it will automatically come up.  See all details taken from CRA website:

Family Tax Cut..... What is the new Family Tax Cut?

Under Canada's tax system, federal personal income tax rates increase with the level of taxable income of the individual. As a result, a couple in which one individual has a higher taxable income than the other often pays more federal income tax than a couple where both individuals have equal taxable income.  The October 30, 2014 announcement included a proposal to introduce the Family Tax Cut, a new non-refundable tax credit of up to $2,000 for eligible couples with minor children based on the net reduction of federal tax that would be realized if up to $50,000 of an individual's taxable income was transferred to the individual's eligible spouse or common-law partner. This would take advantage of a spouse's lower income tax bracket.

When will the new Family Tax Cut be effective?

This new tax credit will be effective for the 2014 and subsequent tax years.

Will the new Family Tax Cut be included in the 2014 individual income tax and benefit return to be released in January 2015 for the upcoming filing season?

Yes

Who is considered an eligible spouse or common-law partner for the purposes of the Family Tax Cut?

To be eligible, your spouse or common-law partner must be a resident of Canada on December 31 of the year (or on the date of death) and you were not, because of a breakdown in your marriage or common-law partnership, living separate and apart from each other at the end of the year and for a period of 90 days or more beginning in the year.

Can I claim the Family Tax Cut?

You can claim the Family Tax Cut for a tax year if:

  • You were a resident of Canada on December 31 of the year (or on the date of death);
  • You have an eligible spouse or common-law partner for the year who has not claimed the Family Tax Cut;
  • You have a child who is under 18 at the end of the year who ordinarily lives throughout the year with you or your eligible spouse or common-law partner;
  • You were not confined to a prison or similar institution for a period of at least 90 days during the year;
  • Neither you nor your eligible spouse or common-law partner became bankrupt in the year;
  • Neither you nor your eligible spouse or common-law partner elected to split eligible pension income in the year; and
  • Both you and your eligible spouse or common-law partner file an income tax and benefit return for the year.
How will I claim the Family Tax Cut credit?

To claim the credit, complete new Schedule 1-A, Family Tax Cut, and enter the amount calculated on line 423 of the Schedule 1, Federal Tax.

Can I share the Family Tax Cut with my eligible spouse or common-law partner?

No. Either you or your eligible spouse or common-law partner can claim the Family Tax Cut for a year, but not both. This credit cannot be shared.

My former spouse and I have joint custody of our child, who is under 18 years of age. Can we both claim the Family Tax Cut?

Because of a joint custody arrangement, your child may have ordinarily lived with both you and your former spouse or common-law partner throughout the year. Provided that you and your former spouse each have an eligible spouse or common-law partner for the year, and all of the other conditions for claiming the Family Tax Cut (see Can I claim the Family Tax Cut?) are met, you can both claim the credit for the year.

Will my net income or taxable income change if I claim the Family Tax Cut?

No. This credit is calculated as if an individual allocated up to $50,000 of taxable income to an eligible spouse or common-law partner of the individual. Your actual net income and taxable income will remain unchanged.

If I claim the Family Tax Cut, will it change the Goods and Services Tax/Harmonized Sales Tax (GST/HST) credit, Canada Child Tax Benefit (CCTB), and other federal or provincial benefits and tax credits?

No. Unlike pension income splitting, your net income and the net income of your eligible spouse or common-law partner will not change if you claim the Family Tax Cut. As a result, benefits and tax credits that are calculated based on net income, such as the GST/HST credit, the CCTB, the age amount, and the spouse or common-law partner amount, will not change.

If I intend to claim the Family Tax Cut for 2015, can I reduce the tax being withheld from my employment income or other income during the year?

The CRA cannot approve a reduction of tax withheld at source based on a claim for, or the intention to claim, the Family Tax Cut.

If I intend to claim the Family Tax Cut for 2014, can I reduce my instalment payments?

Many individuals are required to pay tax by instalments, and the CRA issues instalment reminders to them indicating the amounts to be paid by each instalment due date. However, as an alternative to paying the amounts shown on the reminders, instalment payments can instead be made based on either the individual's prior-year net tax owing and CPP payable, or his or her estimated current-year net tax owing and CPP payable.

Under the current-year option, an individual can estimate his or her current-year net tax owing for 2014 based on the intention to claim the Family Tax Cut. However, if the instalment payments are insufficient, instalment interest may be charged.

Where can I get more information about the proposed Family Tax Cut?

The CRA is committed to providing taxpayers with up-to-date information. The CRA encourages taxpayers to check its Web pages often. All new forms, policies, and guidelines will be posted as they become available.

In the meantime, please consult the Department of Finance Canada's announcement for further details.

Was this answer helpful? Yes No

No answers have been posted

More Actions

People come to TurboTax AnswerXchange for help and answers—we want to let them know that we're here to listen and share our knowledge. We do that with the style and format of our responses. Here are five guidelines:

  1. Keep it conversational. When answering questions, write like you speak. Imagine you're explaining something to a trusted friend, using simple, everyday language. Avoid jargon and technical terms when possible. When no other word will do, explain technical terms in plain English.
  2. Be clear and state the answer right up front. Ask yourself what specific information the person really needs and then provide it. Stick to the topic and avoid unnecessary details. Break information down into a numbered or bulleted list and highlight the most important details in bold.
  3. Be concise. Aim for no more than two short sentences in a paragraph, and try to keep paragraphs to two lines. A wall of text can look intimidating and many won't read it, so break it up. It's okay to link to other resources for more details, but avoid giving answers that contain little more than a link.
  4. Be a good listener. When people post very general questions, take a second to try to understand what they're really looking for. Then, provide a response that guides them to the best possible outcome.
  5. Be encouraging and positive. Look for ways to eliminate uncertainty by anticipating people's concerns. Make it apparent that we really like helping them achieve positive outcomes.

Select a file to attach:

Do you still have a question?

Ask your question to the community. Most questions get a response in about a day.

Post your question to the community