May 19, 2015

Taking Advantage of Income Splitting Loans

When considering wealth management options and the resources available, it's important to note that only one portion of the plan deals with asset investment. The big picture ties in other areas that provide you with peace of mind when it comes to your family's well-being, and in addition provides individuals numerous advantages when considering the options available.

When considering wealth management options and the resources available, it's important to note that only one portion of the plan deals with asset investment. The big picture ties in other areas that provide you with peace of mind when it comes to your family's well-being. For the purpose of this article, family taxation is at the forefront, and more specifically saving on taxes through various methods of income splitting. Ian Robinson, Principal at Grant Thornton LLP, provided CWB McLean & Partners with a white paper directed towards this concept, highlighting the advantages of spousal loans within the household. As quoted by Ian:

 

“The most obvious tax planning opportunity that flows from this low prescribed rate of interest is the use of income splitting loans. Provided the loan is made while the prescribed loan rate is still 1%, the interest rate on the loan will remain at 1% for as long as the loan is outstanding, regardless of how much interest rates increase in the future.”

Expanding on Ian’s words, the Canadian government has made a conscious effort to stimulate the economy over the past several years, this has resulted in a policy of low interest rates. Notably, one spouse can loan funds to another spouse to make an investment, and in doing so can charge the prescribed rate of 1% to the borrowing spouse, avoiding attribution. This creates an outstanding tax-saving and income-generating strategy, one which many families have yet to take advantage of.

To view Ian Robinson’s informative whitepaper please click the following link: Income Splitting Loans