Tag Archives: income splitting

Does GenuTax Standard Free Software Calculate the New Family Tax Cut Income Splitting Reduction?

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On our 2014 taxes there is a new credit to reduce the tax payable by a 2-parent family with children under the age of 18. The maximum saving is $2 000 and it’s calculated based on parents “splitting” up to $50 000 of income on their federal tax calculations. The math is done on a new 2 page schedule, Schedule 1-A. I checked to see if GenuTax Standard 2014 would automatically calculate and apply this new benefit to a tax return for a married couple with young children, like mine.

Did GenuTax Standard Calculate the Family Tax Cut For Me?

Yes.

Before calculating my own 2014 tax return, I ran a test for a married couple with 2 children, 8 and 19, filing their taxes.
During the Interview process, I clicked on the button “Prepare Returns Together.”

Later into the interview, I reached the Family Tax Cut window. It said:
“Do you or your spouse or common-law partner wish to claim the family tax cut for 2014?
“The family tax cut is a non-refundable credit that could save you or your spouse or common-law partner up to $2000.
“To be able to claim this tax credit, you must have at least one child that ordinarily lived with you or your spouse or common-law partner throughout 2014. The credit is calculated based on the net reduction to your and your spouse or common-law partner’s combined federal taxes if up to $50 000 in taxable income was transferred from the individual with the higher taxable income to his or her spouse or common-law partner. See Help for more information”

And it asks you to select the answer

  • Yes
  • No

I selected Yes.

Still further into the Interview section, after entering income information etc. I reached the
Claim for the Family Tax Cut window. It said:
“The family tax cut that may be claimed is $X,XXX.00. Either you or your spouse or common-law partner may make this claim.
“Which spouse or common-law partner is claiming the family tax cut on their
tax return for 2014”

And it asked you to select the answer

  • Wife
  • Husband

(Actually, it provides their names based on what you entered earlier in the interview. It also states the actual amount of the tax cut that it has calculated, such as $714.37.)

By selecting the right person, the income tax owed by that person was reduced properly by the Family Tax Cut amount.

I ran a variety of cases for fun, to see what would happen.

  • For a very low income family ($36,000 combined) the program advises that there is no Family Tax Cut saving to be applied.
  • At about $55 000 in total family income, earned mostly by one person, a small family tax cut of several hundred dollars is available.
  • At about $125 000 earned only by one of the couple, the maximum family tax cut of about $2 000 is available.

The actual amount depends on the taxable income of each parent.

As usual, the program asks for information about dependent children including their names and dates of birth.

Where Does GenuTax Standard Report the Tax Savings Created by this New Family Tax Cut?

The amount that can be saved is reported during the interview process. You can also see it by printing off the tax return and looking at Schedule 1-A or line 423 of Schedule 1.

Do I Recommend Using a Tax Program to Calculate the Family Tax Cut?

Maybe.

You can fill out Schedule 1-A by hand. It’s boring and takes a bit of time though.

Since you can use StudioTax or GenuTax Standard tax software for free, I’d recommend using one at least to check your work.

How Much Did We Save Thanks to the Family Tax Cut?

Well, let’s just say we can afford one more family skating afternoon but not necessarily with hot chocolate.

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Will you qualify for this new Family Tax Cut? Or is it just another reason to think the government is playing favourites? Please share your views with a comment.

Does StudioTax Calculate This New Family Tax Cut Income Splitting Reduction For Me?

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2014 is the first (and possibly the only!) year when the government has given us the choice to try to reduce the tax payable by a 2-parent family with children under the age of 18. The maximum benefit has been restricted to $2 000 although they say that the parents are allowed to “split” up to $50 000 of income on their federal (not provincial or territorial) taxes. It’s really just a math-intensive way to give a credit to your federal income tax payable. In fact, there are 2 pages (Schedule 1-A) of math! So I was curious to see if StudioTax would automatically calculate and apply this new benefit to a tax return for a married couple with young children, like mine.

Did StudioTax Calculate the Family Tax Cut For Me?

Yes.

I ran a test case with a married couple with 2 children under the age of 18 filing their 2014 tax return. When asked at the beginning if I wanted to create returns for both husband and wife at the same time I said yes. I also entered the usual information about the dependent children because they need to be listed to claim the Children’s Fitness and/or Children’s Arts amounts. I did not input any extra information directly intended to prompt the program to try to apply the new “tax splitting” for the Family Tax Cut.

StudioTax went ahead and did it though.

Where Does StudioTax Report the Tax Savings Created by this New Family Tax Cut

The actual amount that this pretend “income splitting” is saving you is reported on Line 423 of Schedule 1.

The detailed calculations are in Schedule 1-A.

Do I Recommend Using a Tax Program to Calculate the Family Tax Cut?

Maybe.

It’s not particularly difficult to complete Schedule 1-A by hand with a pencil and a calculator. It is dull and time consuming though.

Given that you can use StudioTax or GenuTax Standard tax software for free, I’d recommend you at least double check your work by using a tax program.

How Much Did We Save Thanks to the Family Tax Cut?

Well, let’s just say we can afford one more dim sum lunch this year but not necessarily with soft drinks. Fortunately I love the tea our local restaurant provides!

Related Reading

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Did you benefit from this Family Tax Cut? Or is it just another source of irritation to you? Should the government really be spending its time tinkering at this level with our tax forms? Please share your views with a comment.