# Pension Income splitting



## sherwooddavid (May 5, 2009)

I am wondering if I am eligible for pension income splitting when my wife retires next year. 
My wife will be 55 and I will be 57 when she starts taking her company pension. I have approx. $600k in RRSP's that I don't take any income from. Therefore I have a zero yearly income.
My wife's pension will be approximately $50K and I am wondering if pension income splitting is a possibility ??


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## kcowan (Jul 1, 2010)

Yes company pensions can be split at any age. A tax program will calculate the optimium split (not always 50%).


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## sherwooddavid (May 5, 2009)

Thanks very much for the info. 
It sounds like it will be a bit of a tax break for us when my wife retires.


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## al42 (Mar 5, 2011)

Anyone know if splitting is done on a yearly basis or once you start splitting you must continue?
Reason for asking is my wife retired last year with a company pension and I have no income other than Interest and Dividend income.
when I start pulling money out of my RSP it probably wont make sense to split any more but it sure does now.

Thanks
Al


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## Davis (Nov 11, 2014)

You decide each year when you file your tax return. It is simply a tax planning calculation on your tax return.


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## al42 (Mar 5, 2011)

Thanks Davis...that's what I thought but just wanted to check.


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## cougar (Oct 15, 2014)

Besides splitting income, it also gives the other spouse the 2,000 pension income deduction!


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## al42 (Mar 5, 2011)

Besides splitting income, it also gives the other spouse the 2,000 pension income deduction! 

Really...how does that work?


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## cougar (Oct 15, 2014)

I believe this is true-attached info from Turbo Tax

What are the advantages of splitting pension income?
As we all know, in Canada, people who make more money pay more income tax. This little-known strategy allows the spouse who has the highest income to lower his tax payable by sharing up to 50 % of his pension income with his spouse.

Are there other advantages than reducing income tax?
•It can be used to give access to the Pension Income Tax Credit to the spouse with the lowest income or to increase that spouse’s pension tax credit. To benefit from this scenario, the spouse receiving the pension income has to be under age 65. For example, the receiving spouse would declare $10,000 in pension income, claim the full amount of the Pension Income Tax Credit ($2,000) and see his federal income tax reduced by $300.
•Reinstate Old Age Security benefits by reducing or eliminating repayment (clawback)
•Reinstate Age Amount Credit by reducing or eliminating repayment (clawback)

What are the most common types of income that people can split with their spouse or partner?

The Canada Revenue Agency talks about qualified pension income. What it consists of varies depending if you are under or over 65. In general, that represents private pension income, including a pension received from a former employer. If you are over the age of 65, you can also split payments from an RRSP or a registered income fund (RIF).

What common types of income are not eligible?
•payments from the Canada Pension Plan (CPP) or the Québec Pension Plan (QPP)
•Old Age Security payments
•income from a United States individual retirement account (IRA)

Are there conditions my spouse and I have to meet to split my pension income?
In general, you cannot have lived apart for 90 days or more during the year due to a breakdown in your relationship and you both had to be residents of Canada.

How does it work?
Using tax software like TurboTax makes it super easy with the Pension Income Splitting Optimizer. We will ask you all the right questions and do all the calculations for you. Form T1032 has to be completed by both spouses (meaning both spouses have to agree to the split) and attached to both returns.


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## al42 (Mar 5, 2011)

Thanks Cougar, I have turbo Tax and just found the optimizer. It's under tools and it takes care of everything for you including the $2000. pension deduction.

Al


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## cougar (Oct 15, 2014)

Love that optimizer-makes figuring out which spouse should take which credit and income splitting easier. Besides claiming the pension income splitting DH and I looked into the family tax credit as we still have a child under 18. It seems we can do just one or the other and for some reason( not sure why) the pension split gives us a slightly better tax refund.


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## al42 (Mar 5, 2011)

Looks like we qualify for this Ontario trillium benefit as well.
Another bonus I found using Turbo Tax.
Anyone else qualify for this credit?


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