Income Spitting
Pension income splitting is a very common planning tool that most couples take advantage of to varying degrees. The goal of pension splitting is to bring both spouses’ taxable income closer together (shifting income from the higher income earner to the lower). Having two spouses with identical incomes is the most efficient tax situation to be in, but rarely does this happen without the help of pension sharing.
Spousal RRSP - This is a way to split retirement income by contributing in your working years. This is useful when one spouse earns more than the other or will have more income in retirement. The reason is, the contributing spouse receives the deduction, while the income is taken in the other spouse’s name.
Pension Income - Most sources of pension income can be split up to 50%, the main difference is the age at which it can be split. Defined benefit pension income can be split as early as 55, and RRIF/LIF income cannot be split until 65.
CPP - Sharing is calculated by using the percentage of time spent living in common law throughout the contributory period (date oldest turned 18 - date youngest started receiving CPP). If the couple has lived together for the full period (50 years), the maximum CPP amount would be sharable.