Pension Income Splitting
A CRA rule that lets a couple shift up to 50% of eligible pension income to the lower-income spouse, cutting their combined tax bill.
If one spouse has more pension income than the other, you can elect each year (on Form T1032) to transfer up to half to the lower-income partner, who reports and pays tax on it at their lower marginal rate. Eligible income includes RRIF withdrawals (only from age 65), lifetime annuity payments from a registered pension plan (any age), and registered pension plan payments. CPP and OAS are not eligible for the T1032 election, but CPP has its own sharing mechanism through Service Canada. Pension splitting also lets each spouse claim the $2,000 pension income amount, knocking another few hundred dollars off the bill.
A 60-second lesson that puts this term in context, alongside the others, lives inside the Finlo app.