What Does the Family Tax Cut Mean to You?
First you want to know that you can either call this new tax incentive the family tax cut or you may want to refer to it as income splitting. Either way it is only going to be applicable to some. So, for those who can take advantage of it then it is a good thing, but for others it has no value to them at all, so it is being dubbed as unequal towards all tax payers.
The family tax cut is basically a reporting of the income by a couple, and relates to the tax bracket they are in. Many times one of the individuals makes more money than the other so their tax brackets are different. This new incentive allows the higher income producer to transfer some of his taxable income to the lower income partner for tax purposes. Which could mean the higher taxed income now ends up in a lower tax bracket.
Unfortunately this does nothing for the single parent, or for those who are already in a low income situation, or for the single tax payer. So who really benefits? Well, those who feel this tax incentive is unfair will tell you it’s the wealthy that are yet again getting the breaks, and the government will tell you that two thirds of the benefits will help middle to low income families.
There are a lot of circumstances that have to be considered when looking at this potential tax break in its totality:
The single parent scenario:
It is not uncommon for a single parent to be in a situation where they have to work two jobs just in order to make ends meet. After all they are relying on just one income to cover many of the same expenses that a two parent family have. Yet, the combined income from these two jobs puts them into a higher tax bracket and therefore they are paying more taxes.
The single tax payer:
The argument could be made here that the tax payer who has no family financial obligations has less financial pressure on them, and therefore can afford to pay more taxes.
The family tax payers:
Their argument could be that even though there are two parents that are generating income it cost more for them to do so. They often need a second vehicle, and there are additional employment expenses.
While this new tax incentive may be causing a wave of excitement amongst those that it is going to benefit, this all could change depending on who wins the next election, as some parties are opposing it. So it could come down to being an important election issue.
What is the cost?
The long term effects of a potential tax break such as this also should draw some concerns from the tax payer no matter what their view is, as to what price is really going to be paid for it? According to the government, this is going to cost $4.6 billion, yet they indicate thanks to a surplus it can be afforded.
What is not perhaps being realized here is that once this new Family tax cut takes place the child tax credit will be cut, but this is being replaced with the enhanced UCCB benefit.
While there are split feelings not only on this particular topic but many of the other tax related issues that have arisen throughout 2014, the best approach to the upcoming tax season, is to look at your specific tax situation, and along with a chosen experienced tax accountant approach your tax responsibilities with a positive and hands on approach.