Income Splitting Over the Age of 65 in Canada

The changes to the income splitting rules that went into effect at the beginning of 2017 contained an opportunity for income splitting with shareholders over the age of 65. However, what may be less well understood is that the age 65 applies to the “source individual” not the recipient individual. So here is an example. My husband is older than me. If I am the person who is running the business and he has a smaller role, or no role, I can’t income split with him via dividends under this rule until I am 65.

There is an argument to be made for waiting to pay dividends until you are over 65. This provision allows for retirement planning. You can take salaries as needed until you are 65 and then pay dividends to you and your spouse from the corporation during your retirement. So, for those of you who were thinking that you can pay dividends to your spouse under this rule, you can only do this once you reach 65.


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