Up until 2017 it was not smart to pay dividends from your business to your children until they turned 18. The recent changes to the income tax act have changed this age to 25. You should check with your own advisors of course, but for most situations it is no longer a good idea to pay dividends to your own children. These dividends are characterized as split income which means that the kid who receives the dividend pays the highest tax rate of your province on the money and cannot use any personal exemptions to reduce the tax. This is a punitive tax. Of course, many parents had plans to use a family trust to funnel dividends to their children to help pay for their university education. This option is now gone. Something to remember on Election Day.
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