Income Splitting in Retirement
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- เผยแพร่เมื่อ 16 ก.ค. 2024
- How do I pay less taxes in retirement?
This is a question that is on the mind of many retirees. After all, income taxes may very well be one of our largest expenses in retirement. In this video I am going to explain income splitting and its effect on averaging down your retirement tax bill and leaving more money in your pocket so you can enjoy your retirement.
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TIMELINE:
0:00 - Intro
1:22 - Income Splitting
3:35 - What can you Split and Share?
7:09 - What CAN't you Split or Share?
9:39 - Action Items
Thanks Mark! Great coverage of the various components..including the fact the RRSP withdrawal are not eligible even if one thinks that it is "pension income". Would be good to mention that the spouse (recipient) does not need to be over 65 years of age..only the contributor needs to be over 65. Another important point to mention in examples which provide income and taxes/savings figures, one should be wary of the various provincial brackets for Canada to determine the correct estimated savings
Another excellent video Mark. One thing about income splitting that hasn't been clear to me is do both parties have to be over 65?
Thanks! In the case of splitting RRIF income, no, only the transferor (account holder) needs to be 65. For something like a workplace DB pension (lifetime payments), there is no age restriction either on the transferor (pensioner) or transferee (spouse).
I am 66 with a LIF and a RIF CPP and OAS. My wife is 46 with no income.
Can I income split anything?
LIF and RIF yes, CPP and OAS no.
Hey Mark, me again... Based on my research, OAS payments do not count against your GIS eligibility, and GIS eligibility is primarily based on your on your previous years Net Income. However I noticed that when completing my income tax, that OAS is bundled into my Net Income. If the above is true, how do I split out OAS from my Net Income ?
Hi Rick. You are right. OAS is not included in the GIS calculation. The CRA will do this calculation when calculating your eligibility for GIS. You don’t need to amend your return for this purpose. If you have more detailed questions feel free to set up a time with me.
Happy New Year Mark. Love your videos. I have some questions - I turned 65 in Dec 2023. Can I income-split for tax year 2023? Do I need to wait till 2024? I also received bridge benefits in 2023. Can I income-split that too? As well, can I claim the pension income tax credit for 2023? Would appreciate your thoughts. Many thanks. Mark.
Great questions. You can split your registered pension benefits with a spouse or common-law partner regardless of your age. I believe the bridge would likely qualify here. Since you were 65 years old at the end of the tax year, you can split your RRIF income with your spouse, even if they are not yet 65. You can claim the pension income tax credit as well since you were 65 at the end of the tax year. The portion of the bridge that you split with your spouse should avail them to the pension income tax credit as well. I think I should do a retirement income splitting Q&A video because I've been getting a lot of these lately :). Thanks for watching!
Great video Mark. Is Retirement RIFF Income splitting done at the end of the year by filling out government forms when completing your income tax, or do you have to actually deposit money into your spouses account ?
Thanks Rick. It’s all handled on the tax return. No need to deliver cash to different bank accounts.
Hey Mark, I have another question that no seems to be able to clearly answer….. Last year I converted one of my RRSP to a RIFF and I am withdrawing the minimum amount. I recently discovered that I no longer need the minimum amount. Is there a way to convert part of my RIFF back to an RRSP so I can reduce my minimum withdrawal amount ? (I am 64). Any feedback is appreciated.
Yes, you can directly transfer funds from your RRIF back to your RRSP on a tax-sheltered basis as long as you are not past your age 71 year. This does not require additional RRSP contribution room.
If you want to re-contribute the minimum that you have to collect in 2024 (3.85% of your RRIF balance on December 31, 2023), you DO need RRSP contribution room for that small portion.
Hope that helps.
@@WalhoutFinancial That is wonderful news!, thank you Mark. Can you clarify what you mean by "a tax-sheltered basis" ? Does this require that a specific form needs to be completed or a process that needs to be followed ? (Also thanks for the tip on re-contribution of the minimum, but will probably not need to do this at this time). Cheers Rick
@@rickstanhope7154 tax-sheltered, meaning you won't realize income for the amount transferred directly between your RRIF and RRSP in the year of the transfer. I haven't done this myself, but I think the forms will be a fairly straightforward internal transfer form at your financial institution. Definitely work closely with your advisor to make sure this is done with care.