- A financial strategy for tax purposes. Splitting income refers to the process of shifting income from the hands of one family member to another, who is in a lower tax bracket and will therefore pay tax at a lower rate. This helps reduce your family's overall tax burden.
allot wages, divide salary
Related Terms and Acronyms
- Audit — Definition,
- An examination of a taxpayer's income tax return or other transactions bearing tax consequences. Audits range from a simple letter from the agency to a detailed review of individual or business tax filings and records.
- Average Tax Rate — Definition,
- The real rate of taxes you pay after taking into account the various federal tax brackets. There are different tax rates for different levels of income; you pay lower rates on the first part of your income, more on the later earnings. As you pass each income level, the money above that level is taxed at the next higher rate. Therefore, your average tax rate is less than the top rate you pay on a portion of income.
- Household Income (HHI) — Acronym, Important,
- The total income of all members of a household.
- Income Tax — Definition,
- The main source of revenue for the federal government and many Provinces. The tax is based on your earned and unearned income. The amount or percentage taxed is based on the amount of income, using the governments graduated tax scale.
- Marital Deduction — Definition,
- For estate tax and gift tax purposes, a deduction that allows you to transfer assets to your spouse tax-free.
- Non-refundable Credit — Definition,
- Tax credits reduce your tax liability dollar-for-dollar. Non-refundable credits can get your tax bill down to zero.
- Payroll Taxes — Definition,
- A tax based on wages and salaries that is deducted from employees pay cheques.
- Personal Disposable Income — Definition,
- Personal income minus personal income tax payments. Also called "take-home pay."