December 15, 2019

“Should I loan investments or money to my spouse?”

In order to save on taxes, a spouse can legally loan money to their spouse if he or she makes less money. This plan could backfire however if the money loaned is attributed back to the higher income spouse and taxed in their name. If you do a spousal loan, set up the loan in a way that avoids attribution by investing the money in longer term accounts. Income splitting can also be achieved using a family trust to decrease taxes.

“The idea behind a spousal loan is to lend money from a high-income spouse to a low-income spouse. If the subsequent return on the investments exceeds the loan rate prescribed by the Canada Revenue Agency, the general result is that income is effectively moved from one spouse to the other, and the family may pay less tax overall.”

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