To reduce tax, let lower income spouse invest

It is very common that one spouse earns a much higher income than the other does. For those families, the family’s combined tax bill can be reduced if the higher earner pays family expenses and the spouse with lower income saves and invests.


The marginal tax rate for the spouse with lower earnings is lower because of our progressive tax system. The income and gains from the investment will be taxed in the hands of the low-earning spouse at his/her lower tax rate, thus tax saving is achieved.

Make tax planning and implementation audit-proof

Keep a clear record of the source of the investment funds to avoid the investment income being attributed to the spouse with higher earnings. For example, the personal income from the low-earning spouse can be deposited into a separate bank account rather than a joint account. Then those funds could be used to make investments in the name of the low-earning spouse.