# Pension income splitting



## jman123 (Jan 28, 2015)

Greetings,

A couple of questions regarding pension age splitting.

I will be 66 years old next month.

I would like to open a small RRIF. Then, I am thinking of withdrawing 4K from this RRIF. 

It appears that I can split this 4K income between me and my wife and we can both claim the pension income tax credit. Is that correct?

Will the 4K income be considered income solely under my name or will only 2K be, the other 2K under my wife's name? I would think under both but I thought I would check.

If both, then does it matter what age my wife is? She will turn 65 in December.

Thank you.


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## pwm (Jan 19, 2012)

Yes, 2K goes on both tax returns. You each get the $2,000 credit. I've been doing it for many years. My pension as well as my RRIF withdrawal gets split 50/50. The tax credit that was withheld gets split as well. I don't think that spouse has to be over 65 but someone will confirm that I'm sure.


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## habsfan59 (Oct 23, 2012)

https://www.canada.ca/en/revenue-ag...income-splitting/eligible-pension-income.html

From the link above,You and your wife can split the RRIF $$$ and both can get the Pension Income Amount. As well, according to the CRA Link your wife age has no impact.


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## OhGreatGuru (May 24, 2009)

As you appear not to have done this before:
1. You will receive a T4 RRIF for $4K in your name.
2. You report this $4K on Line 115 of your Return.
3. Complete Form T1032 "Joint Election to Split Pension Income" (I think 2 copies - one for each spouse)
4. You enter a $2K deduction for split-pension income on Line 210 of your return.
5. Your spouse enters $2K of split-pension income on Line 116 of her return.

The calculation of the related pension tax credits all flows from this. Form T1032 gives direction on where to go in the worksheets for these calculations. CRA never makes it easy.

PS. If you are using tax filing software it will do most of this for you if you tell it you want to split some of the pension income.


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## jman123 (Jan 28, 2015)

OhGreatGuru said:


> As you appear not to have done this before:
> 1. You will receive a T4 RRIF for $4K in your name.
> 2. You report this $4K on Line 115 of your Return.
> 3. Complete Form T1032 "Joint Election to Split Pension Income" (I think 2 copies - one for each spouse)
> ...


Thank you so much for the information. Much appreciated to all who responded.


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## OhGreatGuru (May 24, 2009)

You're welcome. I wanted to make sure you were aware it wasn't as simple as each of you reporting only $2K of the income. Since the T4-RRIF is issued in your name, CRA will be looking for the full $4K in Line 115 of your return. The Pension Splitting procedure in T1032 has the effect of transferring half of it to your spouse (or any other percentage if you choose) but it has to be documented with this paper trail. As someone else mentioned, if there is tax withheld on the withdrawal, the process transfers a portion of the tax withheld as well. If we had joint returns for couples as they have in the USA it might be easier.


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## AltaRed (Jun 8, 2009)

OhGreatGuru said:


> As you appear not to have done this before:
> PS. If you are using tax filing software it will do most of this for you if you tell it you want to split some of the pension income.


Most? tax software will optimize the pension splitting amount, up to the 50% allowed. Sometimes the answer is counter-intuitive depending on other tax credits, clawbacks, etc. Unlikely to be the case here given the intent is to capture the pension income credit.


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## like_to_retire (Oct 9, 2016)

I think it's time for this unfair practice of pension income splitting to end as it's an unbelievable tax advantage for married people who have eligible pension income. 

Where are the tax breaks for those who are single to match those given to retired couples? 

Probably the one good thing the Liberals ever did was to cancel the total income splitting proposed by the Conservatives in 2015. They foolishly stopped short of cancelling pension income splitting (for votes) and then lowered the eligibility age for Old Age Security and the Guaranteed Income Supplement to 65. Duh, just as I though the Liberals might do something smart, they let me down.

ltr


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## latebuyer (Nov 15, 2015)

Thanks. I'm single and i find this irritating. I will actually invest in tfsa more to get away from this and so i can leave my estate tax free to beneficiaries. Tfsa is more equitable.


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## leoc2 (Dec 28, 2010)

like_to_retire said:


> I think it's time for this unfair practice of pension income splitting to end as it's an unbelievable tax advantage for married people who have eligible pension income.
> ltr


Dang ... BCred (Aka Altared) wants to kill my OAS and now your after my pension splitting...Man it's tough to execute my retirement plan if the government agrees with you guys. :wink:


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## ian (Jun 18, 2016)

Don't worry. I suspect nothing will happen. Seniors form the most reliable voting block. Why do you think Harper made these changes in the first place? VOTES. Liberals are no different.


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## latebuyer (Nov 15, 2015)

Unfortunately singles don't make up a homogenous voting block so the government doesn't care about us. At least my parents are benefitting from income splitting.


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## AltaRed (Jun 8, 2009)

ian said:


> Don't worry. I suspect nothing will happen. Seniors form the most reliable voting block.


And CARP carps about everything unabashedly and without shame......


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## OhGreatGuru (May 24, 2009)

like_to_retire said:


> I think it's time for this unfair practice of pension income splitting to end as it's an unbelievable tax advantage for married people who have eligible pension income.
> 
> Where are the tax breaks for those who are single to match those given to retired couples?
> 
> ....


There is too little space to start a discussion on broader tax reform - really needs a separate thread. But:
- IMHO pension income splitting should not be eliminated, but the principle should be expanded to income splitting between couples of any age;
- From a social policy point of view the single person only has to support one person on that income; couples have to support 2 on the combined family income.


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## pwm (Jan 19, 2012)

I'm approaching "three score & 10", retired 14 years, and I have more disposable income now than I have ever had in my life. Every time I hear another statement from CARP, saying we need more govt. support for seniors, I cringe. CARP is an embarrassment. It's young people struggling to get a start in life that need the help.


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## AltaRed (Jun 8, 2009)

pwm said:


> I'm approaching "three score & 10", retired 14 years, and I have more disposable income now than I have ever had in my life. Every time I hear another statement from CARP, saying we need more govt. support for seniors, I cringe. CARP is an embarrassment. It's young people struggling to get a start in life that need the help.


I agree, and I have way more disposable income 13 years into retirement than I had at time of retirement. But we do have some seniors at/below the poverty line and GIS is woefully inadequate* in addressing this issue. That is where the excesses of OAS currently being paid out for wealthy seniors needs to be re-directed. There is a revenue neutral solution there somewhere.

*I believe GIS is totally clawed back at about $18k of income for a single and about $25k for a couple. Those numbers need to be boosted by about a third while still providing some incentives to earn additional income part time (as the 2019 budget proposes).


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## like_to_retire (Oct 9, 2016)

OhGreatGuru said:


> - From a social policy point of view the single person only has to support one person on that income; couples have to support 2 on the combined family income.


If I have $100K pension income as a single and my neighbor and his wife have $100K pension income, it certainly doesn't cost twice as much to support themselves as the single person. Between those two households, the mortgage is the same, the hydro is the same, the cable TV is the same, the city tax is the same, the house internet is the same, and on and on. Sure, there are some differences, but to split that $100K between two people and compare the taxes and clawbacks compared to the same household next door that has a single person is simply unfair.

ltr


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## latebuyer (Nov 15, 2015)

If a caucasian person was given a tax advantage over an ethnic minority, that would be considered discrimination but somehow when it comes to single people, its okay. I'm just glad there is a tfsa now. The RRSP is for rich, married people.

Just a note too that single seniors are the most at risk for poverty in retirement so if anything they need help, not married people.


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## ian (Jun 18, 2016)

Get over it. It might not be fair but it is politics. It has nothing to do with fairness, equity, or common sense. I cannot see it changing. Easy to give something, much more difficult to take it away. 

If giving a tax break to an ethnic minority would ensure victory at the polls I have no doubt that at least two political parties would make it part of their election platform in some form or another.


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## latebuyer (Nov 15, 2015)

https://www.lowestrates.ca/blog/finance/it-time-single-people-got-more-tax-breaks

Isn't it time single people get more tax breaks?

No doubt get over it was the same thing they said to women when they weren't allowed to vote. Get over it. Your husband votes. Why do you need to vote? This is what they say to keep people down.

In any event, all I can do is optimize to reduce tax as much as possible for my individual circumstance.


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## OnlyMyOpinion (Sep 1, 2013)

latebuyer said:


> ... In any event, all I can do is optimize to reduce tax as much as possible for my individual circumstance.


That's all any of us can do. 
You know that married couples are treated unevenly as well? 
For example, a two income family can deduct childcare expenses that a one income stay-at-home mom can't. Additionally, subsidized daycare and early(ier) childhood education are common - no benefit to a childless couple.

And as Alexandra points out in your link, married couples (not incl children) don't really get much in tax benefits until retirement time. 

Many of us on CMF have suggested that OAS/GIS should be adjusted to be of more benefit to lower income seniors (married or single). I supect this will occur in the not-too-distant future as growing numbers of seniors and decreasing government revenues become an issue.


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## ian (Jun 18, 2016)

I think that singles and youth will be at the bottom of the list when it comes to tax breaks. Why? Because they traditionally have the lowest voter turnout.

There is a reason why seniors and middle income families seem to catch all of the tax and tax credit breaks. They have higher voter turnout. Both major political parties aim many of the budget goodies toward them in the hopes of securing votes.


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## Eclectic12 (Oct 20, 2010)

latebuyer said:


> ... I'm just glad there is a tfsa now. The RRSP is for rich, married people ...


Seemed to work just fine for my single neighbour, putting in at 40+% and pulling out now at 20%.

Compared to the married neighbours with kids, he also commented he was able to easily put into the RRSP.


Cheers


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## OnlyMyOpinion (Sep 1, 2013)

Eclectic12 said:


> Seemed to work just fine for my single neighbour, putting in at 40+% and pulling out now at 20%.
> Compared to the married neighbours with kids, he also commented he was able to easily put into the RRSP.
> Cheers


I agree. LB has a misguided attitude at best.
My single dau has contributed about $37k over 8 years (~$4600/yr) without difficulty. This has provided a refund each year (which has gone into her TFSA), and within the RRSP she is fully invested in MAW104 which has grown tax-sheltered to nearly $50k.

Is having 'too much' saved for RRIF income at age 71 relative to mtr during contribution years a concern? 
Not at all, reaching early FI she will have the flexibility to take a sabbatical from work and drawdown, or retire completely at an earlier age. Nice problem to have.


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## latebuyer (Nov 15, 2015)

I have a pension so another reason not to overload rrsp. No pension income splitting. 😞


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## Eclectic12 (Oct 20, 2010)

So does my neighbour ... though he has switched jobs a couple of times so the pension isn't going to be huge, making withdrawals from RRSP/RRIF less of a hit.


Cheers


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## latebuyer (Nov 15, 2015)

I may just split my money 1/3 each between tfsa, rrsp and mortgage. Its difficult to know what is best, but some articles have stated having a good sized tfsa makes it more flexible for tax planning in retirement.


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## like_to_retire (Oct 9, 2016)

OnlyMyOpinion said:


> I agree. LB has a misguided attitude at best.


Everyone has an opinion that reflects their own circumstances. They're all valid - not misguided. Somehow I'll bet that everyone who feels this pension splitting is a great idea are the same people who feel that LB, who can't claim it since they're single is misguided. 



OnlyMyOpinion said:


> Is having 'too much' saved for RRIF income at age 71 relative to mtr during contribution years a concern?


Some may not feel it's a concern, and that's their opinion. No problem.
Myself, I started in the early 70's putting the maximum away in my RRSP, following the prevailing recommendations. My average contribution MTR was quite low as I was just starting out in my field. I can't really come up with an average contribution MTR over the many years, but I always contributed the maximum.

Save, Save, Save was the mantra my entire career, so that now when I look at the MTR in a few short years when I have to withdraw from that RRSP, I'll enjoy an MTR in the 52% range. I can assure you this is far above the MTR that the funds were deposited. What a joy it would be to split that income.

I see my neighbor, who is married, can split that RRIF and not only enjoy a very low MTR upon withdrawal, he also doesn't suffer any OAS clawback that I do, nor loss from the provincial surtax or the over 65 federal or provincial tax credit. How nice for him and all the people on this thread that enjoy these advantages and dare to say that LB is misguided because he happens to be single.

ltr


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## OnlyMyOpinion (Sep 1, 2013)

like_to_retire said:


> Everyone has an opinion that reflects their own circumstances. They're all valid - not misguided. Somehow I'll bet that everyone who feels this pension splitting is a great idea are the same people who feel that LB, who can't claim it since they're single is misguided.
> 
> Some may not feel it's a concern, and that's their opinion. No problem.
> Myself, I started in the early 70's putting the maximum away in my RRSP, following the prevailing recommendations. My average contribution MTR was quite low as I was just starting out in my field. I can't really come up with an average contribution MTR over the many years, but I always contributed the maximum.
> ...


I didn't mean to be insulting anyone's marital status LTR. I was referring to LB's comment that RRSP's are only for rich, married people. The early merits of contributing to an RRSP have nothing to do with wealth, marriage or pension splitting. 
Certainly the benefits when finally withdrawing will be impacted by your other income and marital status. Some of that can be optimized by planning ahead, some can't. I certainly wouldn't dissaude my dau from contributing just because she might never get married or may end up with fewer tax advantages than her neighbour has.


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## latebuyer (Nov 15, 2015)

Why do you think they tell people 40,000 and under to contribute to a tfsa? The richer you are the more the rrsp benefits, if you are low income, not so much. Like to retire is a cautionary tale of what can happen if you have a higher income and don't have income tax splitting available to you. There should be something comparable for singles in this instance. I've done my own research and talked to a financial planner and I'm doing the best i can for my own individual circumstance. RRSPs aren't for everyone.


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## Eclectic12 (Oct 20, 2010)

like_to_retire said:


> Everyone has an opinion that *reflects their own circumstances. They're all valid* - not misguided. Somehow I'll bet that everyone who feels this pension splitting is a great idea are the same people who feel that LB, who can't claim it since they're single is misguided ...


Not sure what is unclear about my neighbour being single and disagreeing with LB's sweeping statement that makes no mention of individual circumstances.




like_to_retire said:


> ... How nice for him and all the people on this thread that enjoy these advantages and dare to say that LB is misguided because he happens to be single.


I guess I should tell my neighbour to stop contributing to his RRSP because of your 52% MTR withdrawal rate situation and LB's situation, right?

Or are RRSPs YMMV instead of "single = RRSPs are a disaster"?


Cheers


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## Eclectic12 (Oct 20, 2010)

latebuyer said:


> ... Like to retire is a cautionary tale of what can happen if you have a higher income and don't have income tax splitting available to you ...


 ... and my neighbour is single, does not have income tax splitting and will benefit so for me, YMMV.

It's like the poster from years ago who caught on to the risk of having too much of his RRSP, decided to cash it out while working to "keep taxes low" but had no idea of whether he would be affected or not.




latebuyer said:


> ... There should be something comparable for singles in this instance.


Agreed ... though it's going to take some doing to get changes made.




latebuyer said:


> ... RRSPs aren't for everyone.


And conversely - being single without income splitting does not mean they are useless or guaranteeing a 52% MITR when withdrawing.

IMO it is important to be aware of the factors but skipping looking at one's options can mean the wrong move, as illustrated by the "I must cash out my RRSP while working" plan.


Cheers


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## latebuyer (Nov 15, 2015)

As you can tell this topic just sets me off! Thats why i saw a financial planner so i could see someone who is more objective about my situation. I'm not saying rrsps are bad, just that tfsas open a whole new opportunity for tax optimization. I appreciate some people are acknowledging the current tax situation is unfair to singles. Thanks for listening to me vent!


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## Eclectic12 (Oct 20, 2010)

Then please put in something about "YMMV" or "check your situation" because otherwise, intended or not - the short "The RRSP is for rich, married people" IMO implies there is no variation where single people are hard done by and married/rich have all the breaks.


Cheers


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## AltaRed (Jun 8, 2009)

For a significant number of Canadians, perhaps even the majority, $10,000 TFSA contribution room ($20k per couple) would be more valuable long term to avoid the MTR debate. The only downside to a TFSA from being a bonafide retirement plan is the lack of penalties for withdrawal, meaning people have to be very disciplined to contribute deliberately and leave it alone.

I can hear singles saying $20k per couple is not fair BUT the reality is half of relationships break up at some point pre-retirement, and even some post-retirement. The same reality is actually true for RRSPs as well, e.g. I went through an asset division, including RRSP and DB pension with my divorce 11 years ago. As Eclectic has said, it is situational and YMMV.


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## Eclectic12 (Oct 20, 2010)

latebuyer said:


> As you can tell this topic just sets me off!


Hopefully not to the point of causing sleepless nights or physical issues!




latebuyer said:


> ... Thats why i saw a financial planner so i could see someone who is more objective about my situation. I'm not saying rrsps are bad, just that tfsas open a whole new opportunity for tax optimization ...


I'd like to have a lot of the education taxes back as I don't have children but I am not losing sleep over it.

Perhaps more importantly on the TFSA front - how is it fair that my niece gets an extra almost thirty years of TFSA contribution room?
Maybe the gov't can help me out by giving some extra room to level the field? :biggrin:




latebuyer said:


> ... I appreciate some people are acknowledging the current tax situation is unfair to singles. Thanks for listening to me vent!


No worries.


Cheers


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