If you receive certain pension income, you may be able to claim the $2,000 pension income tax credit (also known as the pension amount) as well as split this pension income with your spouse or common law partner. But what pension income qualifies?
If You Age 65 Or Older
If you are over the age of 65, the following qualifies as pension income:
- Income from a superannuation registered pension plan
- Annuity payments from an RRSP
- Payments from a RRIF, LRIF, or LIF
- Annuity payments from a Deferred Profit Sharing Plan (DPSP)
- Regular annuities reported on box 24 of your T4A
- Income averaging contacts (IIAC) reported on box 19 of your T5
Certain foreign pensions also qualifiy as pension income if reported on line 115 of your tax return except:
- The foreign pension deducted at line 256 because it is exempt under an income tax treaty.
- Income from a U.S. Individual Retirement Account (IRA)
- Excess amounts from a RRIF that are included on line 115 and transferred to an RRSP, another RRIF, or annuity
If You Are Under Age 65
If you are under age 65 qualified pension income is limited to:
- Registered pension plan payments, or
The following, but only if received as a result of the death of a spouse or common law partner:
- Annuity payments from an RRSP
- Payments from a RRIF, LRIF, or LIF
- Annuity payments from a Deferred Profit Sharing Plan (DPSP)
- Regular annuities reported on box 24 of your T4A
- Income averaging contacts (IIAC) reported on box 19 of your T5
- Foreign pension income mentioned above
What Income Does Not Qualify?
- Old Age Security (OAS)
- Canada Pension Plan (CPP)
- Quebec Pension Plan (QPP)
- Saskatchewan Pension Plan (SPP)
- Amounts received under a retirement compensation arrangement (RCA)
- Variable pension benefits paid from a money purchase provision of a RPP are not considered life annuity payments and do not qualify you are over age 65 at the end of the year or the variable benefits are received as a result of the death of a spouse or common-law partner.
For More Information?
The CRA has some great resources to help you determine if you have pension income that qualifies for the pension income amount and pension income splitting. Click here to see the CRA site.
Related Articles
- Income Eligible for The Pension Income Tax Credit
- Pension Income Splitting For Canadians
- How To Split Pension Income
- Why Pension Splitting Does Not Kill Spousal RRSPs
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{ 12 comments… read them below or add one }
I receive pension payments from a DB Pension plan from my former employer. I am under age 65 and infer from the above that I can split this income with my spouse for tax purposes.
Are you saying that CPP payment are not eligigble for income splitting?
Yes, if you are receving payments from a DB pension plan, then you can split those paytments, for tax purposes with your spouse.
You cannot split CPP. You can call Service Canada and request that you and your sposue’s CPP credits be split. This is not normally a 50/50 split but should equalize income to a certain extent.
I am still a little confused about pension splitting eligibility. Both my wife and myself are under 65 and we both receive pension income from defined benefit company pension plans. Are we eligible to split pension income?
Geoff,
Yes. RPP income from a defined benefit pension plan can be split with your spouse if you are under age 65.
Can you clarify for me please? My father has a defined contribution plan at work and is planning to retired not long after he turns 65. Will he be able to split the income from this plan with my mother? (She gets a small CPP and will start to receive OAS this year….) Or is he only able to split this income if he converts it into an annuity?
Thanks,
Meghan
Yes. The pension will be used to purchase a registered annuity or moved into a locked in retirement account. The payment from the locked in retirement account or the annuity would qualify for pension income splitting.
In year 2000, following a merger, my employer offered me severance package and I elected to take defined pension benifit under locked in RRSP. I am planning to draw money from my RRSP in December, 2011 when I turn 71 in October.
In the interim, the pension plan is partially wound up and I am offered an additional lump sum that I have to take as income. I am left with very little RRSP room.
My wife is 69 and not working.
Would the lump sum that I receive from pension plan qualify for income splitting?
Unfortunately a lump-sum payment does not qualify as pension income for the purposes of the pension income tax credit. Therefore you cannot split this income.
Hi, I was wondering if my spouse is eligible for the Pension Tax credit. He is under 65 and his only source of income is a Disability Canada Pension Plan, Is he eligible for this tax credit?
No. He must be over the age of 65 and be receiving eligible pension income. Disability and CPP is not considered eligible pension income.
Is money received as RIF income payments eligible for income splitting?
R. Ryan
Only if the annuitant is over age 65.