Income splitting - age 65 or over - RRSP RRIF | General financial discussion | Discussion forum

I don't think so.
The only way you can split RRSP money is if you buy an annuity with it.

According to my notes, sources eligible for pension income splitting are: payments from employer pension plan, annuity payments from RRSP (or RRIF?), and RRIF withdrawals.

Don't mess with success!

It would make sense that RRiF annuity payments could be split, but I didn't have it clearly stated in my notes. Best to confirm.

I found some things on the CRA web site.

According to CRA: Do you qualify to split your pension income?, one

1. receives pension income that qualifies for the pension income amount (line 314) or
2. is 65 year or older and received income from a retirement compensation arrangement (RCA) that's reported on Box 17 (Distributions eligible for pension income splitting) of T4A-RCA slips.

I'm not sure what an RCA is. I suspect most people are in category (1) and not (2).

For category (1), Which pension or annuity income qualifies for the pension income amount? has the details for those under 65 years and those 65 years or older.

For those 65 years or older, Can you claim the pension income amount? has a detailed table of what qualifies and the conditions. RRSP income that's reported in Box 16 (Annuity payments) of a T4RSP slip qualifies with no conditions. That looks like the annuity payments from an RRSP Loonie mentioned.

I don't think RRSP withdrawals qualify for splitting, even when one is 65 years or older. I think such withdrawals are reported in Box 22 (Withdrawal and commutation payments) of T4RSP slips. Box 22 amounts are not in the table.

pooreva said
Income splitting works well after you are 65 and take money from RRSP.

How and does it work if you have to live of your GIC interest? If GIC is your only income and you have joint account with your spouse?  

As a good practice only, I have moved all RRSP withdrawals through a RRIF Account even when under age 65.

You need a lot of $ to live off of GIC interest only. But it definitely is a nice supplement when you are on a fixed income pension(s), OAS, and CPP (which does have adjustments).

You can have GICs pay interest by the month or annually. I choose annually so there is no discount on the interest rate and I try to do my GICs quarterly but they are not evenly distributed quarterly. I set 20% of interest aside for income tax. I do have a tailored updatable budget to follow that works too.

Yes joint account with spouse.

Since my income was significantly higher than spouse, income splitting has always worked very well for us.

pooreva said
My question was - if I receive one T5 from a bank for all my joint accounts generated interest, could interest be split and then reported to CRA ?
E.G. If T5 shows 10K with both names, could person A claim 5K and person B $5 in their returns?  

Technically you are required by CRA to allocate joint interest income in proportion to each contributor's share of the principal. Obviously that can be a bit tricky without detailed records, and in the absence of such records many people just ballpark it, e.g. 50-50, 60-40, 70-30, whatever.

Whatever you choose, make sure it's a reasonable reflection of the facts, and then be consistent in future years. It's important to remember how this plays out in the long run, because you can't keep bouncing around the income split ratio between the joint holders that you report from one year to the next in some attempt to doctor your tax liability. That would be an invitation to have your returns challenged

Londonguy said

Technically you are required by CRA to allocate joint interest income in proportion to each contributor's share of the principal. Obviously that can be a bit tricky without detailed records, and in the absence of such records many people just ballpark it, e.g. 50-50, 60-40, 70-30, whatever.

Whatever you choose, make sure it's a reasonable reflection of the facts, and then be consistent in future years. It's important to remember how this plays out in the long run, because you can't keep bouncing around the income split ratio between the joint holders that you report from one year to the next in some attempt to doctor your tax liability. That would be an invitation to have your returns challenged  

I never had realized the allocation calculation from interest. I have always done 50-50 for joint. But learning here years ago I did my income tax as say 60-40. And both ways with income splitting the tax due was same. I think the difference income has made it easy for us for income splitting.

Just a bit off topic but related. Once retired I took the road of converting RRSP through RRIF to fully fund our TFSA annual allotment. This helps, maybe, for either of us to have a lower income tax wise and for income based programs like provincial medical monthly premiums (but no longer in BC) or Pharmacare for reducing price of prescriptions etc. And to not leave spouse with all funds to have to pay much much more income tax on.

GICinvestor said

I never had realized the allocation calculation from interest. I have always done 50-50 for joint. But learning here years ago I did my income tax as say 60-40. And both ways with income splitting the tax due was same. I think the difference income has made it easy for us for income splitting.

Just a bit off topic but related. Once retired I took the road of converting RRSP through RRIF to fully fund our TFSA annual allotment. This helps, maybe, for either of us to have a lower income tax wise and for income based programs like provincial medical monthly premiums (but no longer in BC) or Pharmacare for reducing price of prescriptions etc. And to not leave spouse with all funds to have to pay much much more income tax on.  

No surprise there. In most cases, as you experienced, if the two of you were in the same marginal tax bracket, the total amount of tax payable between you would stay the same no matter how you divided it. However, where there's a large tax bracket imbalance between spouses and/or there's a large amount of money involved, it can make a big difference -- hence CRA's attribution rules.

And just to make sure that forum readers don't get confused, I'm talking about the taxation requirements when reporting income such as bank interest earned in a jointly held account. The rules that allow seniors to split pension income that @Bill referenced are an entirely different matter, as they permit significant legitimate income splitting capabilities regardless of who earned the money. No doubt that anyone over 65 reading these forums already knows all about that, but younger people may not appreciate we're talking about separate rules