Beginning with the 2007 tax year, you will be able to allocate up to one-half of you pension income with your spouse or common law partner. Prior to the change only Canada Pension Plan (CPP) could be split, and splitting CPP is not straight forward!
In order to split pension income:
- Only income eligible for the pension income tax credit can be split.
- Both spouses must agree to make an election to split pension income by filing the CRA’s form T1032 – Joint Election to Split Pension Income with their tax return.
- Any amount up to 50% may be allocated to your spouse,
- the same proportion of the taxes withheld are also allocated to your spouse
Remember that if both spouses are already in the same tax bracket, there is no benefit to splitting pension income unless the transfer creates or increases the pension tax credit for the spouse receiving the pension income.
Note: Splitting pension income can impact the OAS Clawback, other tax credits, as well as the GST/HST credit. You may want to consult a tax professional to help you determine the split that is right for yous situation.
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{ 2 comments… read them below or add one }
I have been retired for the last few years. 100% of my income comes from a corporate pension. Can I split my income with my wife who does not have any income of her own?
@Ray B: If your pension is a superannuation type plan (i.e. a defined benefit pension plan) then definitely. Otherwise you have to be over 65.
(FYI – I have edited out some personal details.