Income Splitting

views updated

INCOME SPLITTING

The right, created by provisions of federal tax laws, given to married couples who file joint returns to have their combined incomes subject to anincome taxat a rate equal to that which would be imposed if each had filed a separate return for one-half the amount of their combined income.

Income splitting was devised as a result of legislation enacted by Congress in 1948 to equalize the federal taxation of married couples who lived in common-law states and who paid higher taxes than couples who lived in community property states and, as a result, have the tax benefits of income splitting.

More From encyclopedia.com