Weekly Tax Tips
Review pension income splitting with spouse
Date: 3 Feb 2012
If you or your spouse earns pension income eligible for the pension tax credit, an election can be made to transfer up to one-half of the eligible pension income to the other spouse. This is a joint election that can be taken advantage of when filing your and your spouse’s tax returns. The amount transferred reduces the transferor spouse’s net income, and increases the transferee spouse’s net income so a tax saving should generally arise where the transferee spouse has a lower marginal tax rate. However, one should keep in mind that there can be negative effects that arise from increasing a lower-income spouse’s net income. For example, some tax credit amounts (particularly the age credit) and the OAS clawback are based on net income. With this in mind, in certain cases it may be beneficial to elect to transfer from the lower-income spouse to the higher-income spouse. If you have questions about pension income splitting, consult with your BDO advisor.
This tax tip is a publication of BDO Canada LLP on developments in the area of taxation. This material is general in nature and should not be relied upon to replace the requirement for specific professional advice. The information in this tax tip is current as of 3 Feb 2012.
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