My 19-year-old daughter Laura had a taxing epiphany last summer. Fresh from her first couple of weeks at her summer job as a receptionist at a local hair salon, she waltzed in the front door, sat herself down at the kitchen table and ripped open the envelope holding her first paycheque. Her initial giddiness quickly turned to shock. She had worked 40 hours at $10 an hour. That totaled $400. But her paycheque amounted to only $344. Where was the rest of her money?

After a brief talk about how taxes work, I told her the good news—that our family was using several tax and income splitting strategies to make sure we weren’t paying a dime more in tax than we had to. In fact, she was benefitting directly from one of our strategies: the Registered Education Savings Plan (RESP) that her dad and I set up to help her pay for university or college. With an RESP, I explained, she was not only the beneficiary of her parents’ largesse, but also the government’s—since the feds throw in an annual cash grant. Even better, when we withdrew that money, we would pay very little tax on it, because it would be taxed in her hands, not ours. Her reaction? Of course, she wanted to know more.

My experience with Laura reinforced how much interest there is out there among families who want to save on taxes and increase their net household income. Most of us are willing to pay the taxes we have to, but no one wants to overpay. The truth is, the tax man has carefully eliminated almost every loophole out there, so you should take full advantage of the very few strategies left to slash your tax bill. And one of the most effective is income splitting.

Anything you can do to distribute the income your family earns as evenly as possible among all family members will save you big money at tax time. When you use income splitting, you’re taking as much money as possible from the higher-income earners in the family and making sure it’s taxed in the hands of the lower-income earners, whether that’s your husband, wife or the kids. Why do you want to do that?

Because the higher the income of any one person, the higher the percentage that goes to taxes. If one spouse living in Ontario earns $100,000 on her own, she’ll pay about $31,000 a year in taxes and government benefit payments. But if you could split that income evenly between both spouses, you pay only $24,000. Same overall income, but much lower taxes: You’ll save $7,000 each and every year.

The government doesn’t like you doing this, of course, even though in many other countries, such as France, it’s expected that a family’s income should be evenly spread among the family members who live off of it to reduce taxes. So in Canada, we have attribution rules that try to force you to pay the tax rate of the higher-income earner, even if he or she gives the money to lower-income earners in the family. Luckily, there are several clever ways to get around the attribution rules—and they’re all perfectly legal.

The most popular way to split your income is with your spouse. The bigger the difference between your incomes, the more money you stand to save. In each case, the goal is to take as much income from the highest earner as possible, and have it taxed in the lower earner’s hands instead. Here are the most effective strategies.

Invest in the lower earner’s name
Most couples pool their income and pay for their household expenses out of the combined total. But you can save a lot on taxes if you have the higher income spouse pay for all the family bills and expenses so the lower-income spouse can make the investments. That means that all of the interest and capital gains from those investments will be taxed at the lower tax rate of the lower-income earner.