1. Money

Income Splitting


Definition: Because a corporation is taxed separately from its owner, income generated by the business can be taxed at two separate rates – the corporate income tax rate and the owner's individual income tax rate. It's called income splitting when the corporate tax rate is lower than the individual tax rate, and the owner opts to keep a portion of income as retained earnings within the corporation so the lower tax rate applies.

©2014 About.com. All rights reserved.