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T1206 Tax on Split Income (TOSI)

Updated: 2020-07-22

The rules surrounding Tax on Split Income (TOSI) on T1 personal tax returns changed as of the 2018 tax year. 

Previously, the T1206 form was applicable to children under 18. Those rules:

  • gave a deduction at line 232 for the split income;
  • calculated a tax on split income that was added to regular tax as determined on Schedule 1, and;
  • possibly replaced the provincial tax owing amount at line 428 of the T1 jacket.

As of 2018:

  • The TOSI rules can apply to a person of any age.
  • The federal and provincial disability claims for self and dependants can provide a credit which reduces the tax on split income.
  • The split income is added back as income for the purpose of calculating various amounts and credits (see below).

Determining whether the rules apply to your client

The T1206 form includes several pages of detailed instructions to help you determine whether TOSI applies to your clients. To better understand how the TOSI calculations affect your client(s), please review the instructions pages on the T1206 which include extensive definitions of “split income” and several of the terms used in its definition.  

The following sections help you understand how split income affects the calculation of various amounts and credits:

  • The note under Part 1 TOSI-adjusted net income lists the amounts and credits related to the taxpayer, including everything from the age amount to the British Columbia sales tax credit. The exception are:
    • The age amount for Newfoundland and Labrador and Nova Scotia.
    • Nova Scotia low income tax reduction.
    • Income based credits on MB479, MB428A, NT479 and NU479.
  • Page 3 of the instructions lists all the amounts related to spouses and dependants that must use their adjusted net income in their calculation.
  • Page 4 of the instructions indicates how the taxable income used in the calculation of the amount to claim or transfer on all Schedule 11s (except Ontario) and Schedule 2s, as well as the disability amount transfer from a dependant, must be adjusted for the grossed-up value of the federal and provincial TOSI, as applicable for each party involved (taxpayer, spouse or dependant).

TOSI calculations in TaxCycle

  1. To trigger the calculations on form T1206, enter the dividends subject to tax on split income in the applicable fields on the T3, T5 and T5013 data entry slips.
  2. Data flowing from these slips flows to the Detail of split income section between the Part 2 and Part 3 calculations on the T1206. This section provides a breakdown of the amounts that appear in Part 1 of the form.
  3. The fields in Part 1 are calculated fields.

2019-t1206-tosi

  1. To handle the disability amount transfer from a dependant, the field Taxable income (T1 line 260) at the top of the Dependant displays the adjusted taxable income. The related lines in each of the disability amount and tuition transfer sections display the adjusted federal taxable income. Note that the equivalent provincial taxable income field on that form is based off the federal value.
2019-tosi-dependant