When the PMO announced the new family income splitting initiative there was a lot of excitement among families.hi-income-split-istock-8col-300x168-300x168

You’ve probably heard a fair share of criticism as well (which is to be expected when there’s politics involved). But what’s really going on with the family income tax splitting? Is it going to benefit you? Maybe. Here are some of the facts .

When is the tax cut effective?

The family tax cut will be effective this year. That’s right, you can make use of it for 2014 when you file your tax returns.

Will I qualify?

In order to qualify for the tax cut, you must have a spouse and at least one child under the age of 18 who lives with you throughout the year.

How much money will I save?

If you qualify to split income, you will be able to effectively transfer up to $50,000 of income from the higher-earning spouse to the lower-earning spouse. If you are able to make maximum use of the credit (one spouse does not have any income pre-splitting) then the maximum you will be entitled to from this tax credit is $2,000.

How can I claim the credit?

In order to claim the credit, you should hire a professional tax preparer to prepare and file your tax returns. If you’d rather make a go of it yourself, complete the new Schedule 1-A, Family Tax Cut, and enter the amount calculated on line 423 of Schedule 1.

Written by: Chris Brien, CA/CPA