As someone 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 2016
- a corporation of which one of your family members was a specified shareholder at any time in 2016 or
- a professional corporation of which one of your family members was a shareholder at any time in 2016
- 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
- Neither you or either of your parents are Canadian residents
For residents of Québec, you’ll need to pay a special tax if you were born after December 31st, 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 tax software to file your 2016 taxes:
Before you begin, make sure that you told us that you were 17 or younger on December 31, 2016.
- On the PREPARE tab, click the LET’S TALK ABOUT 2016 icon.
- Select the checkbox labelled I had investments and/or investment income, or I bought and/or sold property.
- Click the PENSION PLAN AND INVESTMENTS icon. You’ll find yourself here:
- Under the INVESTMENT INCOME heading, select the checkbox labelled Tax on split income – 2016 (T1206).
- When you arrive at the Tax on split income – 2016 page, enter your information into the tax software.