Income splitting between spouses


One thing I see when I research is that I can split income with my spouse. She currently helps me work on many of my freelance design projects, I currently don’t pay her for these services, but I heard this can be a way to split our income. Is this something I should do, or too much trouble?

A client

Hello M. A client,

Yes, if your wife helps you, you can pay her a reasonable amount for her work. If you split the income, it will result in a lower global taxation between you two.

I suggest you pay her as self-employed. She will have to bill you (you need the invoice) and you will have to issue a T4A at the end of the year. You could also pay her through regular payroll but then you need to do the withholdings, issue a T4, etc. Depending on the characteristics of her work agreement, you might have to pay her as an employee.

The calculation of the reasonable amount that you can pay her has to be linked with the number of hours that she works. It also has to be reasonably considered the tasks that she does and the level of education that she has. As an example, you couldn’t justify that she does neuro-surgeon work for you if she is a nurse. Also, if she does bookkeeping, you cannot justify 40 hours per week at 100$/hour. You must justify a number of hours, the hourly rate and the type of tasks done.

I hope it answers your questions. If you need more information, we can schedule a consultation at your convenience.

Have a nice day!

Note that this article does not constitute legal advice. Every situation is different and the laws change often. To ensure tax compliance, please consult your Impôts Ici ! professional.

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