Canadian Personal Finance Blog

I have been cleaning up my directories and looking over the 900+ postings I have been doing over these past few years and I came across this gem, I Should Divorce My Wife? which points out how strangely set up the tax system is. The concept is purely a “what if” scenario.

I should divorce my wife?

I read that one on the Alan Baggett news site, and scratched my head but it is actually how the tax system is set up currently. If I divorce my wife and pay her Alimony (not child support, remember that case a while back, where that is taxed in the payers hands) I can effectively split my income.

I remember having this argument that in the Government’s eyes the following scenario would be ideal:

1. Divorce my wife, and pay her half my salary as Alimony (thus sharing my income)
2. Have my children live with me, so I might be able to claim the Child Tax Credit and Ontario Tax Credit
3. Rent my wife an apartment in the basement of my house (with it’s own entrance).
4. Have my wife take care of the kids (as daycare) and write off the money I pay her on my income as well (and she does it in my home, so I write that off too).

OK, ok, this is a ridiculous scenario (and I’m sure some might even claim illegal, although I’d love to see that taken to court), but this is how messed up {sic} the entire Canadian Tax System is! I checked this with Quicktax and it was quite happy to show me the obscene amount of tax I’d save.

Alan’s tax bible is an interesting read, as are his stories (they are a little “he said, she said” which at times I am not fond of), but still interesting to read how some people are persecuted by the Tax system, while others get off “scott free”.

Please let me repeat, I do not condone the above tax sharing concept (but if you get away with it drop me a line, I’d be curious to hear).