What 'income' is eligible for pension splitting? | RRSPs and RRIFs | Discussion forum

Try this link: https://turbotax.intuit.ca/tips/understanding-pension-income-splitting-for-seniors-5521#:~:text=If%20you%20are%20the%20recipient,are%20eligible%20for%20pension%20splitting.

CPP can be “shared” not actually split. You can share the prorated amount that you earned while living with/married with your spouse.
You have to apply for sharing in advance and your CPP is then issued to you monthly and your spouse separately. Both get T4’s. There is no sliding scale to adjust for taxes.
In my case I have a work pension that I split and the CPP share also nocks off a little income. Your spouse still gets their CPP as well.

When both spouses are over 65, there is an age amount deduction of around 8,000 as a added deduction if your income is below about 43,000 (you can easily look up the exact amounts that increase every tax year). When I “share” my CPP and max out my work pension split, my spouse is still under the 43000 and gets the max age deduction of 8000+. My tax benefit is that I am over the 43000 threshold and that added CPP share nocks off an additional roughly 5000 that increases my age deduction. You lose 15% for every dollar over the ~43000. So in my case the CPP share saves me 15% of 5000. Which is roughly a tax savings in my case of $750.00

Good tax software automatically does everything for you. It will optimize pension income splitting iterating to the best solution OR in at least the case of UFile, one can arbitrarily set how much pension income is split. It have let the tax software optimize for as long as I can remember.

For the interest of others, neither TurboTax nor UFile is in the cloud if one does not pick the Online version. I download the Executable on to my PC and do my tax return there. I am aware not all tax software has a Mac version.

AFAIK, TurboTax and UFile do all the optimizations at one time iterating for the best answer. There are several things that affect the best balance (split), including the age credit talked about above, pension income splitting, charitable contributions and medical expenses, and even other possible benefits...none of which are usable by ourselves.

MDJ said
But I believe from my Turbo Tax days, that you can manually adjust the optimized split. That comes in handy as it can help avoid monthly instalments.  

Well, yes, one can select the amount of split if one does not want to go with the optimization but why pay more tax than one needs to do so? For most people, it won't make a difference on whether one has to make quarterly installment payments or not.

I have to pay installment payments anyway. My spouse would not have to do so if I did not pension income split but that 'inconvenience' is well worth the tax savings.

AltaRed said
Good tax software automatically does everything for you. It will optimize pension income splitting iterating to the best solution OR in at least the case of UFile, one can arbitrarily set how much pension income is split. It have let the tax software optimize for as long as I can remember.  

Not sure if everyone is getting what I am saying. Yes Turbo Tax automatically figures out optimum split. But it cannot split CPP. Only you can “Share” CPP. So if you know that Turbo Tax is going to share the equivalent of at least half of your CPP income, then the advantage is that it creates a situation where Turbo tax can have a better or wider range to select the optimum split.
Example:
Your Private pension is $40,000.00
Your CPP is $10,000.00
If you share CPP (going forward- you cannot share or split past payments) that you apply to share on “My services Canada” and CRA decides that you can give $4,000.00 divided in monthly Monthly CPP payments to your spouse.
Your Spouse income:
No pension
CPP $12,000.00 T4A (P)
OAS $10,000.00
Shared CPP $4,000.00 (T4A (P)
Probably RIF of some amount but keeping simple.

Turbo tax can decide split of up to half of the $40,000.00
If not “Sharing” CPP then the max that spouse can make with Turbo tax pension splitting is $42,000.00 (minimum $22,000.00)
If “Sharing” CPP to spouse then max that spouse can make with Turbo Tax pension splitting is $46,000.00 (minimum $26,000.00)

Hope this helps someone

Sort of on topic but mentioned in post 5, hopefully someone will have a simple answer to the following.

Why do tax programs automatically combine all of both people's medical expenses and throw them into the tax return of the spouse with the least income/lower tax bracket? On the surface it seems logical the more expenses the better under the tax return of the person with the most income.

Wrayzor said

Most likely because the 3% deduction of income is less for the lower income person. Therefore, a larger credit is available.  

Indeed. One needs to remember these are non-refundable tax credits at 15% (of eligible expenses) against tax owing. It has nothing to do with one's marginal tax rate. And given there is a 3% "deductible", more expenses qualify for the 15% tax credit for the lower income spouse.

dougjp said
Sort of on topic but mentioned in post 5, hopefully someone will have a simple answer to the following.

Why do tax programs automatically combine all of both people's medical expenses and throw them into the tax return of the spouse with the least income/lower tax bracket? On the surface it seems logical the more expenses the better under the tax return of the person with the most income.  

Saying it a bit differently…..to minimize payments to CRA.
Not sure that ALL income tax programs “automatically” throw medical expenses to the spouse in the lower income tax bracket.

Doing my taxes last week I optimized pensions, donations, and medical. < = not automatically, had to trigger each one individually. Did not verify what went where but it brought my side down to be just cents under the next tax bracket for an overall additional savings in the range of $400.

BUT…. did not receive my full age benefit. Will redo do a test file to “share” some of my CPP with spouse and see if that makes a difference.