Get Your Free Report
CALL US AT: 905 943 4046
"WE GUARANTEE OUR FIXED PRICE QUOTATIONS"
Tax planning strategy for spouses with pension income
Not the Tip you want to see?click here for additional tips
You and your spouse can agree to split up to 50% of your eligible pension income, which can save substantial income taxes if divided optimally between the two spouses. This strategy is especially valuable if one spouse is in the highest tax bracket and the other spouse is in the lowest, and the high-bracket spouse has most of the pension income. That situation would mean that all of the income of the high-bracket spouse, including the pension income, is taxed at the highest possible rate. If you transfer 50% of this pension income to the lower-income spouse, then one half of the high-income spouse’s pension income will instead be taxed at the lowest possible rate, unless the transferred income pushes the low-income spouse into the next tax bracket. Even in such a case, the strategy is still beneficial when compared to just leaving all the pension income with the original high bracket spouse. If your spouse is 65 years of age, all of his or her pension income is eligible for splitting, and up to 50% of it can be transferred. If your spouse is not 65, only his or her income eligible for the $2,000 pension income credit is eligible for purposes of the income splitting election.
Please contact us at 905-943-4046 if you need further assistance or accounting services in the coming months. Click here for additional contact information