What is pension income splitting?

Pension income splitting can be used to allocate up to 50% of eligible pension income to your spouse or common-law partner, effectively splitting income with the lower income spouse. Only eligible pension income qualifies for pension income splitting.

Eligible pension income includes:

1. Life annuity payments from a pension fund (i.e.: life income funds and locked-in retirement income funds)
2. Amounts received as a result of the death of a spouse or common-law partner, or if the pensioner is 65 years or older: Registered retirement income fund (RRIF) payments and Registered retirement savings plan (RRSP) annuity payments.

For a detailed list of eligible pension income visit tax tips. Incomes that are not eligible for pension income splitting include Old Age Security benefits, Canada Pension Plan benefits, RRSP withdrawals, and retiring allowances or compensation.

You and your spouse can elect to split eligible pension income if:

1. You and your spouse or common-law partner are married or in a common-law partnership in the year
2. You were both residents of Canada on December 31 of the year Please note that you and your spouse will be eligible for pension splitting if your are living apart from one another for reasons other than breakdown in marriage or partnership

ABOUT THE AUTHOR

ALLAN MADAN

CA.CPA.CGA

Allan Madan is a CPA, CA and the founder of Madan Chartered Accountant Professional Corporation. Allan provides valuable tax planning, accounting and income tax preparation services in the Greater Toronto Area.

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