Line 424 – Federal tax on split income

As of January 1, 2018, in addition to the tax on split income (TOSI) applying to certain types of income of a child born in 2001 or later, the TOSI may now also apply to amounts received by adult individuals from a related business. Where TOSI applies, the disability tax credit can now be used to reduce the individual’s tax payable for the year. However, income that is subject to TOSI must now be added to the individual’s net income to calculate various deductions, credits and benefits. For more information, see Form T1206, Tax on Split Income.

Completing your tax return

The specified individual must report the income on the appropriate lines of their return. However, they can claim a deduction on line 232 for this income.

To calculate the specified individual's tax on split income, complete Form T1206, Tax on Split Income. The special tax is included in the calculation of their federal and provincial or territorial taxes.

Supporting documents

Filing electronically

Keep all of the specified individual's documents in case the CRA asks to see them later.

Filing a paper return

Attach Form T1206 to the specified individual's paper return.

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