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I net approx. twice what my spouse does. At income tax time can I pay her income tax for her so she has more money to invest in her retirement savings account (RRSP)?

I know that if I were to give her money I would have to pay tax on this ‘gift’, but I am also allowed to pay for other expenses without incurring this tax penalty (e.g., paying a larger portion of our shared credit card bill). Does the same principle apply to income tax, or is this something that only the person being taxed can pay?

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    "I know that if I were to give her money I would have to pay tax on this ‘gift’". No you wouldn't. There is no gift tax in Canada. Jan 17 at 19:00
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    Canada doesn't have anything analogous to US's "Married Filing Jointly"?
    – Barmar
    Jan 18 at 16:14
  • Ah, thanks! I thought gifts of money were taxed the same way that gifts of property were— where the person giving the gift pays taxes as if they received fair market value for the property they gifted.
    – Dugan
    Jan 18 at 18:37
  • @Dugan When treating a property gift as having received fair market value, the giver would still only pay tax on the capital gain (the increase in property value since it was acquired), not the full value. But cash is only ever worth its nominal value and never has a capital gain. Jan 18 at 19:24
  • @NuclearHoagie I asked a similar question about tax write-offs associated with cultural donations 2 years ago. Where my father created a work of art that could be donated for a cultural donation tax write-off by either himself or me. I never could figure out the tax implications of him giving me the piece which i would then donate. Any thoughts on this? money.stackexchange.com/questions/114733/…
    – Dugan
    Jan 20 at 17:31

1 Answer 1

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There is no gift tax in Canada. Neither the giver nor the receiver have to pay tax on a gift (unless it's from your employer or something similar). There are a number of rules around income attribution preventing couples from doing unauthorized income splitting, but none of them apply here.

You can pay whatever expenses of your wife's you like. You can pay her income tax, or you can give her money that she can put into her RRSP, whichever you prefer. You can pay her credit card bill as well, whatever is on it. Unless you are gifting property or something similar there will be no tax consequences. Of course you won't reduce your own income tax bill - your income is still your own.

With some couples only one partner has income, and they pay all the expenses for their spouse. This doesn't result in any extra tax liability. (It doesn't reduce tax either).

Also, rather than allowing her to pay into her RRSP, consider contributing to a spousal RRSP. You get to claim the refund (which will be higher than hers if you are paid more) but you have to have spare RRSP room yourself.

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    Last paragraph should be the main content of the answer. We're talking like 2x the benefit of doing so vs OP's plan. Jan 17 at 19:22
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    @Grade'Eh'Bacon True, but only if he has spare RRSP room. Jan 17 at 19:26
  • Very fair point! Jan 17 at 19:40
  • Yes, I’ve maxed out my RRSP this year, so a spousal RRSP doesn’t provide any extra benefit.
    – Dugan
    Jan 18 at 18:35
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    It may still be worth putting some of your money into a spousal RRSP rather than yours. When you retire, the owner of the RRSP pays the tax on withdrawals. If your wife has few RRSPs you will be drawing down the bulk of your income. If the ownership is split more evenly then you can draw down more even amounts, which results in less tax paid. Jan 18 at 18:59

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