Income splitting

Income splitting is when two or more people share their money that they earn so they can pay less taxes. Imagine if you and your friend both got $5 for doing a chore, but you know that if someone gets more than $10, they have to pay extra money to the grown-ups who collect taxes. So, you and your friend decide to share your money and say that you each got $2.50. Now, you both have less than $10 each and don’t have to pay extra taxes.

This is basically what income splitting is for grown-ups. If a family has a mom and dad, they can share the money they make, so it looks like each of them earns less money individually. This way, they can pay less taxes because they have less income. It’s like a way of tricking the tax people, but it’s legal.

However, income splitting is not allowed for everyone. It only applies to people who are married or have common-law partners. If you’re just friends or siblings, you can’t do it. That’s basically what income splitting is in a nutshell!