www.Toronto50Plus.com

Reporting your spouse as dividends on your own tax return, where possible. Sure, it may sound crazy, but taking income from the lower income spouse and adding it to the income of the higher income spouse could actually save you taxes. You see, your spouse earns dividends eligible or in eligible from a Canadian company, he or she will be entitled to claim a dividend tax credit. This is simply a credit that is deducted from your taxes that your spouse would otherwise pay. But what if your spouse isn't going to pay any tax because of not having much income? In this case, the dividend tax credit could go to waste.

Excerpt from 101 Tax Secrets for Canadians

The good news? Our tax law will allow you to elect to include all [it's all or nothing] of your spouses. Canadian dividends on your tax return, where you'll be able to claim the dividend tax credit. How can this possibly save you tax? Simple. By removing the dividend income from your spouses tax return, your spouse's income will be reduced. This will increase the spousal credit, you're entitled to claim for having a spouse who is dependent on you. In fact, the tax collector won't allow you to make the selection to report your spouse as dividends, unless the spousal credit you're entitled to is increased as a result of removing the dividends from your spouse's return. Follow me?

In the end, you'll need to calculate your and your spouses combined tax bills both ways: [1] having your spouse report his or her own dividends, and [2] reporting exposes dividends on your tax return instead. This will tell you whether or not you stand to benefit from the transfer. This is where tax software is going to come in handy. It's easy to do these "what-if" calculations with software. The other option is to speak to a tax pro or a financial adviser who may be able to do the calculations for you.

• it may be possible to save tax by reporting Canadian dividends received by your lower income spouse on your tax return instead.
• this transfer can be made only where doing so will increase the spousal credit you're able to claim as a result of your spouse being a dependent.
• you'll need to crunch some numbers to see if this transfer will be beneficial to you.