Expanded Tax On Split Income (TOSI) Rules For Professionals

Many professionals choose to incorporate a professional corporation to take advantage of the various tax benefits of doing so. Professionals, such as physicians and dentists, who are permitted to include family members¹ as shareholders, have historically been able to benefit from income splitting. Essentially, income splitting is a process whereby high-earning individuals can shift income to lower earning family members as a way of reducing their personal tax burden. Typically, in the professional corporation context, income splitting was achieved by issuing non-voting shares to family members and paying dividends on those shares. The dividends were then taxed in the hands of lower income family members, which worked well for family members who were 18 years of age or older. Dividends paid to family members who were under the age of 18 would be subject to "kiddie tax" and were taxed at the highest individual tax rates.