Characteristics of splitting family tax benefit and strategies of those choosing the splitting

Abstract

The study examines data regarding splitting of family tax benefit received upon children in personal income taxation and the strategies of those splitting the tax benefit. The purpose of the investigation is to analyse proportions of sharing and principles of couples who split the family tax benefit each other, increasing or decreasing each other’s financial opportunities. During the investigations, starting from a general analysis of the thousand people sample of family tax benefit beneficiaries from personal income tax return, we examined more detailed data of those who fully realized the family tax benefit. In the course of the examination we set up theoretical strategies for the analysis of the possible ways of splitting the tax benefit in order to check their matching with real data. The sharing strategy identifiable in the highest proportion was realizing the family tax benefit by 50%-50% by family members, which is influenced primarily by the realizing preferences of families with two children. A theoretical decision-making strategy has been identified in the case of more than half of the families fully realising family tax benefit. It has been found that, after the use in a fifty-fifty ratio, the preference of fathers’ recourse is slightly stronger than mothers’ due to the impact of families with three or more children. This is also typical of cases not identified with a specific strategy. The reason of preferring fathers’ recourse is mostly the idea that who has a larger tax base should use the tax benefit. However, this is not typical for giving preference to maternal use. Our findings indicate that families most often decide on the simplest solution that still can be considered rational, when sharing family tax benefit, which decision is differentiated according to the number of children.