Your ability to split your pension income with your spouse is determined by a number of key factors, such as province of residence (Quebec or otherwise), age, income, and claimed credits and deductions. In order to optimize your pension-income split, be sure you’re entered all of this information into TurboTax prior to beginning.
Consider splitting pension income in the following situations:
- If the transfer of pension income reduces the total taxes payable for a married or common-law couple.
- If one spouse is in a higher tax bracket. At a minimum, you will save the difference in the tax rates between each spouse's tax bracket.
- If one spouse is not fully using the pension credit amount.
- If the spouse with the pension income to be transferred has OAS claw-back or a reduced age credit amount.
- If one spouse is paying provincial surtax.
If both spouses have eligible pension income, are fully using the pension income amount, and are in the same tax bracket, there may be no benefit to pension splitting.
Or, if neither spouse has tax to pay, pension splitting will not be beneficial.
TurboTax will automatically recommend a split amount based on the income and other amounts you enter in your return.
Additionally, you can try the Pension Splitting Optimizer. The Pension Splitting Optimizer will automatically propose the best distribution of your pension income (up to one half), which can help you and your spouse/partner pay less in taxes.
Note: The Pension Splitting Optimizer is not included in our TurboTax Free edition.
The amount of pension income that can be split is indicated on the transferor's T1032 form. Pension income does not have to be split equally (50/50). You can choose the most beneficial amount to transfer to your spouse, as long as it does not exceed 50% of your eligible pension income. Pension splitting can impact other tax credits and calculations. You should review these claims before and after transferring pension income:
- Age amount (line 301)
- Medical expenses (line 330)
- Donations and gifts (line 349)
- Social benefits repayment (OAS clawback) (line 235)
- Spouse or common-law partner credit (line 303)
- Pension income amount (line 314)
- Amounts transferred from your spouse or common-law partner (line 326)
You can choose to override the recommendation by changing the amount in the field to any amount up to the maximum split amount allowed.