Can I split my pension income with my new spouse?

Yes, to qualify, you and your spouse or partner must both be Canadian residents, be living together at the end of the tax year, and remain together for a period of 90 days or more at the beginning of the next tax year. Pension splitting allows you to allocate up to 50% of your eligible pension income with your spouse, or common-law partner, for income tax purposes. You must fill out the Joint Election to Split Pension Income form when filing your personal tax returns.

• The form must be signed by both parties and be available upon request by the CRA
• The transferred portion is reported on Line 11600 of the income tax return of the transferee
• The deducted amount is reported on Line 21000 of the transferor's income tax return

When you transfer some of your pension income, the taxes you paid which are associated with the transferred amount will be reduced and transferred onto the transferee's income return. So, Line 43700 of both returns will be changed accordingly. When you report eligible pension income, you may be entitled to an additional credit called Pension Income Amount of up to $2000. Pension splitting may qualify a spouse who doesn't directly receive pension income to claim this extra amount as well.

This form is quite complex. However, if you use tax preparation software such as TaxTron, the calculations will be done automatically based on your income type, amount, and overall tax situation. TaxTron also provides a pension splitting optimizer that allows you to note the best amount to split and make changes accordingly, if you wish.