Pension income splitting

Eligible Pension Income for Splitting

The types of income that can be split (up to 50%) depend on your age:

If you are 65 or older at the end of the year:

You may split several types of retirement income, including:

• Lifetime annuities from a registered pension plan (RPP) or specified pension plan;

• Annuity payments from a registered retirement savings plan (RRSP);

• Payments from a registered retirement income fund (RRIF), including locked-in retirement income funds (LIFs);

• Survivor pensions or annuities received after the death of a spouse;

• Certain income from deferred profit-sharing plans (DPSPs);

• Some income from retirement compensation arrangements, voluntary retirement savings plans (VRSPs), or pooled registered pension plans (PRPPs).

If you are under 65:

• Federally, only limited types of income are eligible (for example, lifetime annuities from an RPP, or certain survivor payments after a spouse’s death).

• In Québec, however, no income is eligible for splitting if you are under 65.

Income not eligible for splitting

The following cannot be split:

• Old Age Security (OAS);

• Québec Pension Plan (QPP) or Canada Pension Plan (CPP) benefits;

• RRSP withdrawals (unless they are received as annuity payments);

• Other similar income such as certain variable annuities.

Conditions to Benefit

1. Joint agreement – Both spouses/common-law partners must elect the split together using:

   • Form T1032 (federal) and

   • Schedule Q (Québec).

2. Splitting limit – Up to 50% of eligible income can be transferred each year.

3. Residency and marital status – Both spouses must be Canadian residents on December 31 of the year and must not be separated due to marital breakdown (exceptions apply for medical, educational, or employment reasons).

4. Annual choice – The choice must be made every year. Corrections for past years are allowed for up to three years.

5. Shared tax liability – Both spouses are jointly liable for any taxes due on the split income.

6. Year of death – Pension splitting is still allowed if one spouse died during the year, up to 50% of the eligible income.

Summary

Key Takeaways

• In Québec, you must be 65 or older to split pension income.

• You may split up to 50% of eligible pension income with your spouse.

• The choice must be made jointly each year, and both spouses share responsibility for the resulting tax liability.

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