Tax Tips and Pits: Demystifying the new Family Tax Cut

"Without a doubt, the loudest change for 2014 tax prep is the new Family Tax Cut."

Without a doubt, the loudest change for 2014 tax prep is the new Family Tax Cut, affectionately being referred to as “income splitting” by some. This is a non-refundable $2,000 maximum tax credit for eligible couples with a minor child under 18 at the end of 2014.

To be an eligible couple, you and your spouse must not have been separated the first 90 days of 2014, nor separated on December 31, 2014. As well, you and your spouse must have been resident in Canada on December 31, and the minor child must have ordinarily resided with you.

On this point, in the case of a separated couple having joint custody where the child ordinarily resides with both separated parents, if the separated parents now each have new partners, both parents may claim the full amount of the new credit with their respective new partner, subject to the standard conditions to make the claim.  In effect then, the credit can be double dipped.

The Family Tax Cut is a paper transfer of up to $50,000 of earned income from one spouse to the other spouse when each spouse is in a different marginal tax bracket – obviously the greater the differential in tax rates the better use of this credit, zero income for one spouse being the most advantageous scenario.

Having said this – and this is a contentious issue regarding the value of this credit – if one spouse has no income and the working spouse earns $40,000 or less, the credit doesn’t kick in. The argument being that a family with this level of income is able to use other tax credits that higher income earners can’t.

Being a virtual transfer of taxable income from one spouse to the other for the purpose of this credit, the net income and taxable income for each spouse remains just as it would be without the transfer so that other tax benefits and credits are not adversely affected, such as the Child Tax Benefit and GST Credit.

To claim the credit, there cannot be a pension income transfer between spouses.  Both spouses must file a T1 personal tax return even if one spouse would not normally have to file, and they have to be prepared together to establish the transfer. Being a non-refundable credit, only that portion of the credit required to reduce tax liability to zero is used, with any balance not paid to the taxpayer.

For specific detail on this new credit, talk to a tax professional or visit the Canada Revenue Agency (CRA).  Stay tuned for more exciting new tax information in future columns.

Ron Clarke has his MBA and is a business owner in Trail, providing accounting and tax services. Email him at To read previous Tax Tips & Pits columns visit

Just Posted

Passenger count down, fuel sales up at Trail Regional Airport

Heavy snowfall into the spring and ongoing wild fires in 2018 impacted landings at the Trail airport

Vehicles we drive today, better in almost every way

Nutini: The modern day automobile is a marvel of engineering and technology

Trail area homicide investigation continues

Jan. 14 marked one year since Jordan Workman was discovered in the trunk of a burnt car

Outbreak prompts advisory for visitors to extended care wing in Trail hospital

A respiratory infection has been active in Poplar Ridge Pavilion since Monday, advises IH

RDCK moves ahead with Castlegar rec complex upgrade plan

Board approves grant application for $13 million from provincial, federal governments

Fashion Fridays: Inspirational gym outfits

Kim XO, helps to keep you looking good on Fashion Fridays on the Black Press Media Network

Dog dies saving B.C. family from burning home

Homeonwers safe but one pet missing, another confirmed dead following fire

Russian fighter jets collide over Sea of Japan crews eject

One plane crashed after its crew ejected safely, the other crew also ejected but they have not been found

Judge to deliver verdict in British sailor’s gang rape case

The alleged gang rape took place at a Halifax-area military base in 2015

B.C. minister fears money laundering involves billions of dollars, cites reports

The government had estimated that it was a $200-million a year operation, instead estimates now peg the problem at $1 billion annually

BC Hydro scammers bilked customers out of nearly $45,000 in 2018

Nearly 2,000 people reported scams to the utility, as they continue to be more common

Olympian snowboarder Max Parrot diagnosed with Hodgkin’s lymphoma

Each year in Canada, approximately 900 people are diagnosed with Hodgkin’s lymphoma

‘Prince of Pot’ Marc Emery accused of sexual assault, harassment

Emery denied the allegations, but a Toronto woman says she is not the only one speaking out

Vancouver Island photographer makes National Geographic’s 2018 elite

Rare double honour for Marston from the 36 best Your Shots out of nearly 19,000 photos

Most Read