Feds' tax change could affect some families earning less than $100K: analysis

A new analysis says roughly 900 Canadian families earning less than $100,000 a year will have to pay more taxes because of federal changes to tighten income-sharing rules for owners of small businesses.

The federal budget watchdog says measures to restrict how much income the owners of private corporations can sprinkle to family members, as a way to save on taxes, will cost an average of $2,200 more a year for each of the 900 households.

The income-sprinkling change was among a handful of measures Ottawa insists will target wealthy people who use corporate structures purely as a way to reduce their taxes.

The report by parliamentary budget officer Jean-Denis Frechette found that close to 33,000 families could pay more taxes because of the income-sprinkling rule that came into effect Jan. 1.

Frechette's analysis says about 11 per cent of the households affected by the changes earn less than $150,000 per year, while 83 per cent of them make less than $500,000 per year and two per cent bring in more than $1 million per year.

The budget office's preferred estimate also says the changes could generate a tax windfall for Ottawa of about $400 million a year, double the $200-million a year projected in the recent federal budget.