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Intuit

What is pension splitting, and how do I do it in TurboTax?

Pension splitting is the process of taking some of one spouse’s pension income, and then allocating it to the other spouse. It’s important to note that this income is moved on paper only – and there is no need to physically hand over any money to your partner.  

 

 

The main benefit of pension splitting is for income tax savings. By allocating some of the higher-earning spouse’s income to the lower-earning spouse, you can change the rate at which you are collectively taxed, saving more money overall as a couple.

 

 

 

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.

 

 

 

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

 

 

 

  1. Click on the Find (or magnifying glass icon), then select Continue. pension1.png
  2. Type the word "pension" into the search bar, then select "Pension split with your spouse" from the list of results, and select Go. pension2.png
  3. Select who's pension you would like to split (make sure you have entered income information for both you and your spouse prior). pension3.png
  4. Fill out all required information (you will need your T1032 form), then select Continue to complete. pension4.png

  1. Click on the Find (or magnifying glass icon), then select Continue. PTTD1.png
  2. Type the word "pension" into the search bar, then select "Split your pension with your spouse" from the list of results, and select Go. PTTD2.png
  3. Fill out all required information (you will need your T1032 form), then select Continue. PTTD3.png
  4. Fill out all applicable amounts, then click on Continue to complete. PTTD4.png

Helpful tips

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.

Related information:

How does the Pension Splitting Optimizer work?

Are there disadvantages to splitting my spouse's pension income?

The ins and outs of pension splitting

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