How do I split my pension income with my spouse?

by TurboTax• Updated 1 week ago

Your ability to split your pension income with your spouse is determined by several key factors, such as province of residence (Québec or otherwise), age, income, and claimed credits and deductions. To optimize your pension-income split, be sure to enter all of this information into TurboTax before beginning.

Note: When preparing a coupled return with your spouse or partner, access to your T1032 form isn't required. TurboTax will automatically take figures from this form to populate splitting income.

Splitting pension in TurboTax Online

1. Select Find (or the magnifying glass icon).

2. Enter pension into the search bar, select Pension split with your spouse from the list of results, and then select Go.

3. Select whose pension you'd like to split (make sure you've entered income information for both you and your spouse). If you’re a Québec resident, a similar screen will appear next where you’ll be asked to enter the Québec amount to split with spouse.

4. Fill out all required information (if filing separately, you'll need your T1032 form, then select Continue.

Splitting pension in TurboTax Download

Select Find (or the magnifying glass icon).
Enter pension into the search bar, select Split your pension with your spouse from the list of results, and then select Go.
Fill out all required information (if filing separately, you'll need your T1032 form, then select Continue.
Fill out all applicable amounts, then select Continue.

Tips

When should you consider pension income splitting?

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'll save the difference in tax rates between each spouse's tax bracket.
If one spouse isn't fully using the pension income amount.
If the spouse with the pension income to be transferred has OAS clawback or a reduced age credit amount.
If one spouse is paying provincial surtax.

When is pension income splitting not a benefit?

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 won't be beneficial.

How do I determine the optimal pension income split?

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 only available when doing a coupled return.

The amount of pension income that can be split is indicated on the transferor's T1032 form. Pension income doesn't have to be split equally (50/50). You can choose the most beneficial amount to transfer to your spouse, as long as it doesn't 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 claw-back) (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.