Can my spouse and I both hold shares in our Ontario corporation to split income?

Including your spouse as a shareholder — or structuring share classes so dividends can be directed to a spouse — is a common tax planning strategy, but federal rules known as the tax on split income (TOSI) significantly limit its effectiveness for many families.

Under the TOSI rules, which apply federally across all provinces including Ontario, income paid to an adult family member from a private corporation may be taxed at the highest marginal rate rather than the recipient's actual marginal rate, unless an exemption applies. The main exemptions relate to whether the spouse meaningfully contributes to the business — for example, through labour, property, or risk — and whether certain age thresholds and involvement tests are met. The rules are complex and fact-specific.

Before issuing shares to your spouse or structuring dividends to flow to them, you need tax advice tailored to your situation. If the TOSI rules apply, the income-splitting benefit is eliminated. If your spouse genuinely contributes to the business, an exemption may be available. A corporate lawyer can ensure the share structure and shareholder agreement are properly documented, and a tax advisor can confirm whether and how the TOSI exemptions apply to your circumstances.