T1206: Tax on Split Income

If you are 17 or younger, you’ll use form T1206: Tax on split income to report income that’s been split with you and to calculate the tax payable on this amount. Split income is treated differently and is subject to a special tax of 29%, but it also qualifies for a deduction.  In order to use the T1206, both you and at least one of your parents must be a resident of Canada.

You might have received the following types of split income directly or through a trust (other than a mutual fund) or partnership:

  • Taxable amount of dividends (eligible and other than eligible) from ownership of shares of a corporation (other than from shares of a class listed on a prescribed stock exchange and those of a mutual fund corporation)
  • Shareholder benefits (other than from ownership of shares of a class listed on a prescribed stock exchange)
  • Income you received from a partnership or trust that was from providing property or services to, or in support of, a business operated by:
    • a person related to you at any time in 2017
    • a corporation of which one of your family members was a specified shareholder at any time in 2017 or
    • a professional corporation of which one of your family members was a shareholder at any time in 2017
  • Income you received from a business or rental property of a partnership or trust, if a person who is related to you at any time in the year:
    • actively participated on a regular basis in the activity of the partnership or trust of earning that income or
    • has an interest in the partnership directly or indirectly through another partnership

Important: On the T1206 page in H&R Block’s tax software, you’ll need to report your split income that’s from shareholder benefits, a partnership or trust, or a business or rental property of a partnership or trust separate from split income that’s from dividends. Enter your split income other than that from dividends in the field labelled: How much split income did you receive that was not from dividends?

The special tax and deduction don’t apply if:

  • The income is from property inherited from your parents
  • The income is from property inherited from anyone else and, during the year, you were a full-time student at a post-secondary school or you were eligible for the disability tax credit
  • You weren’t a Canadian resident at any time of the year or
  • Neither of your parents were residents of Canada at any time in the year

Residents of Québec

For residents of Québec, you’ll need to pay a special tax if you were born after December 31, 1998 and if your income:

  • Includes taxable dividends on unlisted shares (for example, income that includes a capital gain is a taxable dividend after it’s sold to someone you weren’t dealing with at arm’s length) and other benefits granted to a shareholder for these shares
  • Includes income earned from a partnership or trust that derived it from a business which provides goods and services and is run by a relative of yours
  • Includes income from a partnership or trust that derived it from a business or leasing a property, and a relative of yours:
    • Was actively engaged in the partnership/trust
    • Held a direct interest in the partnership or an indirect interest in it through the intermediary of another partnership

This income might be indicated on your Relevé 15 (RL-15) or Relevé 16 (RL-16) slips. 

Where do I claim this?

Follow these steps in H&R Block's 2017 tax software:

Before you begin, make sure that you told us that you were 17 or younger on December 31, 2017.

  1. Under the PREPARE tab, click IN THIS SECTION icon.

  2. Under Investments (shares, securities, property, tax shelters, etc.) you bought or sold in 2017, click the Add This button.

  3. Click the PENSION PLAN AND INVESTMENTS icon. You’ll find yourself here:

    DIY17_PENSION_EN.png

  4. Under the INVESTMENT INCOME heading, select the checkbox labelled Tax on split income – 2017 (T1206).

  5. When you arrive at the Tax on split income page, enter your information into the tax software.
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