December 5th, 2021

Your Money: Pension income splitting

By Matt Solberg on December 19, 2020.

In Canada, we have a graduated income tax system, which means that taxpayers who earn more income are subject to progressively higher rates of tax on incremental dollars earned. To minimize the overall tax liability for a couple, spouses may elect to split their pension income by allocating certain pension income from a higher-income spouse to a lower-income spouse.

How does it work? In splitting pension income, you may allocate up to 50% of your “eligible pension income” to your spouse. Eligible pension income generally includes sources of income such as payments under Registered Retirement Income Funds (RRIFs) and lifetime annuity payments under pension plans. A taxpayer who reports eligible pension income may claim a pension income amount as a non-refundable tax credit to reduce tax payable. By splitting eligible pension income with your spouse, you may potentially double the pension credit for the family if your spouse does not otherwise have their own pension.

Who qualifies for pension income splitting? Pension income splitting is limited to spouses. For purposes of pension income splitting, spouses are defined as those who are either married or in a common-law partnership at any time in the taxation year and are not, because of a breakdown in the marriage or common-law partnership, living separately and apart from each other at the end of the year and for a period of 90 days or more commencing in the year. In addition, both spouses must be Canadian residents for tax purposes at the end of the year, and at least one spouse must be receiving pension income eligible for the pension income amount.

Handling some or all of these issues can be complicated. Most people, quite rightly, depend upon professional advice to help them. A Financial Planner can work in partnership with a tax professional to guide you in the right direction.

For more information please contact me @ 403-504-2780 or email me at

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