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How do I split my pension income using TurboTax?

by TurboTax•166• Updated 4 days ago

Eligibility to split your pension income with your spouse depends on some key factors, like your province, age, income, and claimed credits and deductions. TurboTax will split your pension income only if the conditions listed here are met.

Note: When you prepare coupled spousal returns with TurboTax Online, the Pension Income Optimizer automatically uses the required amounts from both returns to find the best pension income split.

We'll start with the spouse who's transferring their eligible pension income:

  1. When you start your return, at Who are you preparing this return for:
    • For preparing coupled returns, select My spouse/partner and me. Later, you’ll get guidance from the Pension Splitting Optimizer.
    • For preparing your return separately, select Myself. You won’t get guidance from the Pension Splitting Optimizer.
  2. Proceed through the Personal info profile. This unlocks Tax home. At Tax home, under To do, select Personal info > Start and complete the personal info profile.
  3. At Tax home, select Tax profile > Your tax profile.
  4. Complete the Tax profile steps, including:
    • At We'll start with info about your work and income, check the applicable box(es) for your type(s) of income, including T-slips.
    • At Let's see if there's anything else to add, check the box for I want to split eligible pension income with my spouse/partner.
  5. At Tax home, select Tax profile > Mandatory questions, and answer the questions.
  6. Next, follow your chosen method of return preparation.

These steps begin with the spouse who's transferring their eligible pension income. If you've chosen to do coupled returns, in the top menu of the Tax home screen, you’re able to toggle between your tax return and your spouse’s.

  1. Toggle to your spouse’s tax return and repeat steps 2 to 5 from the previous section, and complete your spouse's/partner’s Personal info, and Tax profile.
  2. At Tax home, from the top menu, toggle back to your tax return.
  3. Complete the Income section of your return, including entry of your pension income info.
  4. Toggle to your spouse's tax return and complete the Income section of your spouse's return.
  5. It’s highly recommended that next, you complete all other applicable sections of the two returns, for example, Deductions and Provincial.
  6. After completing the applicable sections for both returns, from Tax home, select Review > Start > Continue. If you qualify for pension splitting, you’ll arrive at We've Optimized Your Pension Splitting, where you’ll see the pension split amount with the lowest tax.
    • If you want to change the amount, select I want to change my split.
    • If you want to use the lowest tax amount, select Continue.
  7. At Tax home:
    • If you select View detailed summary, you’ll see your split pension deduction at line 21000.
    • If you toggle to your spouse and select View detailed summary, you’ll see the pension income transferred to their return at line 11600.

If you've chosen to do separate returns, starting with the spouse who's transferring pension income:

  1. At Tax home, select Additional information about your spouse and provide the required info.
  2. At Tax home, under To do, select Income. Then, select and complete all income items in turn, including pension income items. For example, you'll complete T4A Pension, Retirement, Annuity if you previously checked the box for having a T4A slip. 
  3. At Tax home, under To do, select Income > Split your pension with your spouse. 
  4. At Pension Splitting, under Whose pension would you like to split, select your pension, enter the amount of pension income you're going to split, and select Continue.
  5. At Tax home, if you select View detailed summary, you’ll see your split pension deduction at line 21000.

For the spouse who's receiving the pension income transfer:

  1. When you start preparing the return, at Who are you preparing this return for? select Myself.
  2. Proceed through the Personal info profile. This unlocks Tax home. At Tax home, under To do, select Personal info > Start and complete the personal info profile.
  3. At Tax home, select Tax profile > Your tax profile.
  4. Complete the Tax profile steps, including:
    • At We'll start with info about your work and income, check the applicable box(es) for the type(s) of income to be reported, including T-slips.
    • At Let's see if there's anything else to add, check the box for I want to split eligible pension income with my spouse/partner.
  5. At Tax home, select Tax profile > Mandatory questions, and answer the questions.
  6. At Tax home, select Additional information about your spouse and provide the required info.
  7. At Tax home, under To do, select Income. Then, select and complete all income items in turn.
  8. At Tax home, under To do, select Income > Split your pension with your spouse. 
  9. At Pension Splitting, select Transferor's Pension and then provide information about the transferor's form T1032 and the amount being split:
    • Enter the amount from line 68020, which is the amount of the transferor's pension income available to be split.
    • If any, enter the amount from line 68040 of the transferor's T1032, which is the amount of tax deducted at source from the pension income.
    • Enter the amount of the transferor's pension income to be split.
    • Enter the amount at line 68026, which is the amount, if any, from box 17 of the transferring spouse's or common-law partner's T4A-RCA slips. 
    • Enter the amount at line 68025, which is the amount, if any, from box 128 of the transferring spouse's or common-law partner's T4A slip.
    • Select Continue.
  10. At Tax home, if you select View detailed summary, you’ll see the pension income transferred to the return at Line 11600.
  1. Complete the Introduction, Profile, and Income & Expenses sections for both returns.
  2. Select Find (or the magnifying glass icon), enter pension in the search bar, select Split your pension with your spouse, then select Go.
  3. Complete either Step 4, or Step 5 plus Step 6 as applicable.
  4. If you're preparing the returns together:
    • At Pension Splitting, select Yes and select Transferor's name, select Continue, enter the amount of pension income to be split, and select Continue again.
    • From the side menu, select View detailed summary. You’ll see the higher income person’s deduction at RPP, RRSP, PRPP, FHSA, or pension splitting, and you’ll see the lower income person’s income included at Pension income.
  5. If you're preparing the returns separately, for the pension income transferor's return:
    • At Pension Splitting, complete the entry of all applicable amounts, including the amount from line 1 of your T1032 form. To get this amount:
    • From the menu, select View > Forms method.
    • Select the Forms button
    • In the search bar of the Form Lookup, enter T1032, select T1032, and select OK. The required amount is on line 1 of the T1032 form.
    • Select EasyStep from the menu.
    • At Pension Splitting, after entering amounts and answers to questions, select Continue.
    • At Pension Splitting, enter all applicable amounts.
      • If any, enter the amount from line 68040 of the transferor's T1032, which is the amount of tax deducted at source from the pension income.
      • Enter the amount of the transferor's pension income to be split.
      • Enter the amount at line 68026, which is the amount, if any, from box 17 of the transferring spouse's or common-law partner's T4A-RCA slips. 
      • Enter the amount at line 68025, which is the amount, if any, from box 128 of the transferring spouse's or common-law partner's T4A slip.
      • After all amounts are entered, select Continue.
    • If you select View detailed summary you’ll see your split pension deduction at RPP, RRSP, PRPP, FHSA, or pension splitting.
  6. If you're preparing the returns separately, for the pension income transferee's return:
    • At Pension Splitting, complete the answers and entries for all applicable amounts, including the amounts from line 1 and box 68040 of your spouse's (the pension income transferor's) T1032 form, and select Continue.
    • At Total income summary you'll see the amount of pension income transferred to the return.

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'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

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.

TurboTax Online has the Pension Splitting Optimizer. The Pension Splitting Optimizer will automatically propose the best pension income amount to be split and transferred (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's not over 50% of the eligible pension income. Pension splitting can affect other tax credits and calculations. You should review these claims before and after transferring pension income:

  • Age amount (line 30100)
  • Medical expenses (line 33099)
  • Donations and gifts (line 34900)
  • Social benefits repayment (OAS claw-back) (line 23500)
  • Spouse or common-law partner credit (line 30300)
  • Pension income amount (line 31400)
  • Amounts transferred from your spouse or common-law partner (line 32600)