# income splitting for senior couple ?



## Ben1491 (Jan 13, 2012)

I am 73, have rrif and lif. My wife is 68, still has rrsp. Both receive more or less equal amount of pension and oas. I started to withdraw part of my rrif and lif. That means my income will be a lot more than hers. Are we qualified for income splitting ? If yes, is that mean that when we file for income tax together, we will pay more or less the same amount of tax ? Thanks.


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## sags (May 15, 2010)

Do you mean when you file separately, but at the same time ?

Private pensions or annuities qualify for pension income splitting. 

If by "pensions" you mean CPP and OAS pensions.......they do not qualify for income splitting.

_The following amounts received by the pensioner *are not eligible* for pension income splitting:

Old age security payments;

Canada Pension Plan, Quebec Pension Plan;
any foreign source pension income that is tax-free in Canada because of a tax treaty that entitles you to claim a deduction at line 256;

Income from a United States individual retirement account (IRA); or
amounts from a RRIF included on line 115 and transferred to an RRSP, another RRIF or an annuity._

http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/pnsn-splt/qlfy-eng.html


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## OhGreatGuru (May 24, 2009)

If your new income puts you in a higher tax bracket than your spouse, you should be able to benefit from splitting pension income. Calculating the optimum amount to transfer requires that you either build a spreadsheet or use Tax filing software. If you are only one tax bracket above your spouse, it should optimize if you transfer just enough to put her at the top of her current tax bracket. But there are 2 income-dependent credits that complicate the calculation - the Age Amount and the Medical Expense amount. Also, if her present income does not presently qualify for the full Pension Income Amount, any pension amount you transfer to her will, up to the maximum of $2K.

If you are still in the same tax bracket as your spouse, pension splitting may not make much difference unless it enables her to use the full Pension Amount credit.


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## Ben1491 (Jan 13, 2012)

Thank you for the replies.
After checking online and I am still kind of confued. Let me clarify a bit. My wife and I both receive more or less same amount of CPP and OAS. I withdrew money from my RRIF and LIF last year. I filed our tax using a tax filing program together for last year. The result was that she got some rebate. While I had to pay quite a bit tax plus some deduction from the institution when the fund were withdrawn. That means the money withdrew from my RRIF and LIF are not quilified for income splitting according the tax filing program. Otherwise we would more or less pay the same amount of tax. Am I right ?


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## Spudd (Oct 11, 2011)

I played with the tax calculator here:
http://www.taxtips.ca/calculators/taxcalculator.htm

and it does look like you should have paid the same amount of tax. Perhaps you missed to fill out this line when you did your taxes?: 
Amount that you are electing to transfer - from taxpayer to spouse


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## Ben1491 (Jan 13, 2012)

Thank you Spudd for the quick reply.
Will go over the tax program to see if there is a line like this. I used 'maxback' feature in Ufile and thought it would automatically do the transfer. Anybody familiar with this program ? Perhaps kind enough to direct me where to check and what I missed ? Thanks.


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## Ben1491 (Jan 13, 2012)

Gone over my 2013 tax return. The program did transfer 25% of my RRIF and LIF to my wife on line 116. However, from the CRA web site indicated that it could be up to 50%.
*Here is the quot from the site :-
How do you split your pension income?
You (the pensioner) and your spouse or common-law partner (the pension transferee) must make a joint election on Form T1032, Joint Election to Split Pension Income .
This form must be completed, signed and attached to both your and your spouse's or common-law partner's paper returns and filed by your respective filing due date. The information on the forms must be the same.
You can allocate up to half (50%) of your eligible pension income to your spouse or common-law partner.
*
Seems to me I need to fill the Form T1023 before filling my return ?


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## Spudd (Oct 11, 2011)

In UFile, you can review your real return with all the forms. At the top, click on the "Tax Return" button. Then on the left hand side, you can see a list of all the forms, and you can see them all and how the program filled them out. 

Hopefully by reviewing the form T1032 you can see what happened. 

I pretended my husband and I were born in the 40s, that I had 30k in RRIF income, and let Maxback decide - and UFile duly assigned 15k of my income to my husband just as I would expect. 

If you do need to make an adjustment it should be possible to file an adjustment to your 2013 taxes.


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## Ben1491 (Jan 13, 2012)

Thank you so much Spudd. 
I certainly would go over my tax files again. Wish the program asked me to fill this form after I enterd there are incomes from my RRIF and LIF. I assumed I do not need to fill in those form unless the program asked me. Perhaps the 'maxback' had already considered this and transfer only 25% to get the optimum return based on my input ? Guess I'll find out.....
Well, my old XP computer that I had with the program died couple months ago. I have the tax files but couldn't find the program installation disk. Will contact Ufile to see there is way to download and intall to my new Win 8 computer.
Anyway, thank you again.


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## Spudd (Oct 11, 2011)

With UFile, it doesn't ask you to fill in the form, it just does it automatically based on your answers in the interview section. I am willing to bet that the form was filled out for you, but unless you can get into the files you won't be able to see. 

It makes me want to print out all my old tax returns in case something like this happens to me. I think I will do that this weekend.

I hope UFile can assist you in getting a new copy without charging you for it.


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## Ben1491 (Jan 13, 2012)

Just flipped through my printed tax return of last year. What do you know, the program did have 'calculation of the maximum split-pension amount', plus 'report on split-pension income'. I couldn't find the form 1032 inside though. It could be the 25% transfer to my wife would be for optimum return ? May be I do not need to redo our tax. Anyway, I will redo my tax if I can get hold of the program. 
Thank you again.


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## Silverbird (Mar 5, 2013)

I worked on my parents return for 2013, hopefully this is helpful, Going off of memory here

One has pension income, CPP, OAS and some RRIF withdrawals
Spouse is not yet 65, so none of those, except some taxable investment income.

The tax program did the optimum tax splitting, however the income and taxes paid move over at the same %age, so the spouse with all of the income (pre splitting) got hit with a nasty amount of tax payable, while the other spouse who received the transfer got a refund.
I wish they could pay a net amount, but it's not so bad, since the e-file refund is received before the payable amount was due.

In total it works out, but the results for one spouse in isolation can look a little odd


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## OhGreatGuru (May 24, 2009)

Silverbird said:


> I... so the spouse with all of the income (pre splitting) got hit with a nasty amount of tax payable, while the other spouse who received the transfer got a refund..


That's not unusual. CRA won't let you write one cheque for the difference. Also, it sounds like the spouse "with all the income" is not having enough deducted at source. If it persists CRA will request quarterly instalments some day.


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## naysmitj (Sep 16, 2014)

sags said:


> Do you mean when you file separately, but at the same time ?
> 
> Private pensions or annuities qualify for pension income splitting.
> 
> ...


I am now confused, when looking at the Pension Sharing on CRA 


http://www.servicecanada.gc.ca/eng/services/pensions/cpp/retirement/sharing.shtml

You can share your Canada Pension Plan retirement pension with your spouse or common-law partner. To do so, you must be receiving your pension, or be eligible to receive it, and be living with your spouse or common-law partner. 

Sharing your pension may result in tax savings.

You must apply to share your pension. 

How does pension sharing work?

There are two ways to share a pension:
•If only one of you contributed to the Canada Pension Plan (CPP) and/or the Quebec Pension Plan (QPP), you can share the one pension.
•If both of you contributed, you and your spouse or common-law partner may receive a share of both pensions. The combined total amount of the two pensions stays the same whether you decide to share your pensions or not.


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## Ben1491 (Jan 13, 2012)

You guys were all correct.
Ufile was great to let me download the program. I checked the original tax file. The 'maxback' transfer approx 25% to my wife. Then I compared with the total tax we'll pay after I changed to 50%. The great 'maxback' *did save us $350 in total *!!! As OGuru mentioned the program would calculate the optimum amount to transfer according our income tax bracket. Well, the $19.99 program is well worth it. Don't think most of us can do this manually.......
Thank you all so much again.


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## OhGreatGuru (May 24, 2009)

naysmitj said:


> I am now confused, when looking at the Pension Sharing on CRA
> 
> ...


Splitting of CPP can't be done on your income tax return, which is why it is not eligible for "pension income splitting" on your T1 Return.

However, CPP can be split at source upon application to CPP. It's not necessarily a 50/50 split. You can only divide the CPP credits you both earned during the period of your marriage. CPP will calculate it for you on application. They aren't the best at explaining this.


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