This is really good information. I am almost seven years older than my husband and hope to retire a few years earlier so I won’t have any income for a couple of years until my defined benefit pension kicks in. He will be working at least five years beyond my working years so good to know.
The OAS clawback is formally known as the OAS Recovery Tax. Consider that the combined federal & provincial marginal tax rate in Alberta at $80K is 30.5%, and the OAS clawback is 15%, so that the true marginal tax rate is 30.5% + 15% = 45.5%. At $98K, Alberta's MTR jumps up to 36%, so that the MTR + OAS = 51%. At about $130K, the MTR+OAS rate drops to 36% because the OAS has been completely clawed back. So the key numbers for Albertans are 45.5%, 51%, and 36% in the taxable income zone where OAS applies. (And if an MTR of +50% doesn't get your attention, nothing will.) In Alberta we don't have a specific health care tax or premium, but some other provinces like Ontario do, and these premiums can be based on taxable income too, so you can throw this into the calculation as well.
At a minimum of 130K of taxable income in retirement is a good position to be in. I don't think you would be too concerned about all of the OAS being clawed back but good advice if you don't need all of this taxable income and you can reduce it by withdrawing the minimum. I suppose if you had a very healthy TFSA as well, you could withdraw from the TFSA, if you absolutely needed the 130K, to reduce the taxable income and gain back some of the OAS.
So to get it right, for younger Canadians, normal personal salary income (not pension income) cannot be split between spouses unless the higher income spouse contribute to their lower income partner's RRSP/TFSA or to give them out a loan and charge interest, right?
I believe before age 65 there is a three year delay on drawing on a Spousal RRSP otherwise the contributor has to claim the last three years of deposits. So you cannot deposit this year and try to take that out through the spouse next year, - three year delay. So you need to plan on stop contributing to the spousal RRSP three years before needing to withdraw the funds.
That's calendar years, so it is less than 365 days x 3. For example, if the last deposit is on Dec 2020 by the higher income spouse, the earliest withdrawal that can be attributed to the lower income spouse is on Jan 2023.
What is it when you wait 3 years, the lower income cashes Spousal RRSP out in year 3, so when can the higher income earner contribute to the Spousal RRSP again?
When is the benefit of pension splitting negated by an increase in the receiving spouse’s income? We benefit from pension income splitting but need to decide whether the receiving spouse should take CPP at 60 and/or withdraw from RRSP. Your channel is invaluable - thank you.
Thank you so much for the video. I am starting a career in the next year or two where I will owe taxes (it’s about 85k) my partner doesn’t work. It’s basically almost exactly what you used as an example. I’m trying to plan now to save money. How much would it be to sit down and go over a solid plan. I know I could watch videos but I’m young and new to all of this. I am a resident of British Columbia as well. Thank you
Hi Adam, thanks for the great video. This is the first time I came across your Channel, so I just subscribed. I am eager to look through your archives to see if you have any materials relevant to helping cross-border families with financial planning. Or for Canadian snowbird families…
Can you do a video on: For BC deferred property tax when 55 and older? 2022 one spouse is 55 in January & one spouse is 55 in October, do both have be 55 at July 3rd 2022? And have a child. If so then put the money that we used to put away for property tax as extra bi-weekly payments. I see the rates, so if 55 then just apply for regular program?: Regular Program 0.45% fees 1st yr $60 fees following yrs $10 Families with Children Program 2.45% Financial Hardship Program 2.45%
I think this income splitting is a great strategy. Why would the government(s) allow us to pay LESS in taxes? What am I missing here? Great video by the way! Thanks for sharing.
In a high/low family income situation, you mention that one spouse can pay all of the family expenses leaving the low-income spouse with more money to invest in a non-registered account. I understand that the low-income spouse's expenses can include income taxes, so that it is possible to leave the low-income spouse with 100% of their gross income to invest. The question is, how do you prove to CRA that you are following this strategy? Is it necessary to run separate bank accounts for each spouse? (Granted, this strategy doesn't really apply to very many average total incomed families, i.e. middle-class families.)
Hi Adam, absolutely useful information on the topic. Following your advice, I downloaded the form T1032, but it’s pension splitting form. Do I need a different form to split my wage/salary income with my wife? Thanks a lot.
Is income splitting allowed from an RRSP or RRIF if one partner has all of the income and is over 65, and the other has very low income and is under 65?
Great ! I might need ur help on tFsA rrsp accounts - where to keep US stocks and Canadian stocks etc and also on tax saving strategies , do u provide live classes or provide service . I shall be arriving in canada soon , any offers for new immigrants ?
Hey Adam, would it be safe to assume that if one spouse's pension (RIF) income is being used (before 65) and the other is not, that the personal tax credit ($15K) can be taken advantage of by the spouse with the RIF income to reduce taxes? AND, is that a good strategy, or is it better to withdraw money from each of the pensions (my RIF and her spousal RRSP) to get the best tax refund? Thanks!
I have a defined contribution plan at work and plan to retire pre-65. I believe that rolls into a RIF om retirement. can I draw on that and income split before 65?
Thanks for the video which I can probably use the info in 10 years or so! I was curious to know if you have any video for a self-employed wife who's making $95K and her husband managing her accounts and would like to get paid from wife. Can she issue a T4 for him in her T2125?
Very informative 👍🏻video but I am still confused I am long haul truck driver living in Manitoba earned 107K in 2022 on payroll. My wife is not working and have a6 years old child. So can I split my income between me and my wife ?
No, only income from a pension plan (any age) or RRSP past age 65. There are a few other accessories as well, but those cover the basis for most. Employment income can't be split.
So if I put my last payment into my spousal RRSP in Dec 2021. Would the earliest withdrawal be Jan 1, 2025 for my spouse to take it out and where my spouse would claim it as taxable income. Total put in 2021 would be $20,000. What would happen if my spouse took out $20,000 in Dec 2024.
She can withdraw early as Jan 1 2024 but can’t contribute into her rrsp until Jan 1 2025 that what I understand about 3 year attribution rule. I could be wrong.
@@ParallelWealth you have mentioned a few times that singles are at a tax disadvantage over couples? I must be missing something. Are you saying it is unfair that a single person earning, say, $80k, should pay the same taxes as a couple earning the same amount? The GIS is based on family income, shouldn’t total taxes paid also be based on total family income?
@@bl9531 Each individual files taxes separately in Canada, even when married. Having a spouse allows income splitting and can result in a lower tax bill. That is what this video covers. Yes, some benefits are tested using total household income, like GIS and CCB.
@@MrKaterman - who said that individuals don’t file their own income tax?- having a spouse allows pension splitting, not income splitting- at the same time, many deductions are based on combining income - the Guaranteed Income Supplement is one example. Btw, if a couple divorces the same pension gets split.
Quick question Adam... is there an optimal $ amount to move from my RRSP to RRIF starting at age 65 to age 70? (assume $100k available to move over during those 6 years). Also, can we Income Split when the money is withdrawn from an RRIF and is there a max $ allowed to split? Thx again.
Money from RRIF past 65 can be split. As for the first question, there is no magic number. Do the whole thing as long as the min isn't more than you need.
My wife hasnt worked for over a decade and I have made 6 figures each year, recently 200k, why has my accountant not mentioned this? Is there something that makes you inelligable?
@@mattstevenson2425 There's a 3-year attribution rule, which means contributions to a spousal RRSP can't be taken out for at least three years after the date they were put in. If the funds are taken out within 3 years, the money becomes taxable income for the contributing spouse.
1. If wife working, Husband not working (65) can she split Employment income with Husband? 2. If wife working Husband not working (64) can she split Employment income with Husband
Can a spouse who is over age 65 split their RRSP with a spouse who is under 65yo? And I don't mean 64yo. Let's talk people with a decade or more apart in age.
Also, could you talk about TFSA and RRSP strategies for one spouse who is 65+, the other is under, AND the household still receives the Canada Child Benefit. So Adjusted Family Net Income still matters to the household finances. (Yes, you can be 65 and have a child under 18. ;-) )
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I always learn something from these videos. Thanks Adam.
Good to hear Richard - it's why we create them!! Always nice to get positive feedback.
This is really good information. I am almost seven years older than my husband and hope to retire a few years earlier so I won’t have any income for a couple of years until my defined benefit pension kicks in. He will be working at least five years beyond my working years so good to know.
The OAS clawback is formally known as the OAS Recovery Tax. Consider that the combined federal & provincial marginal tax rate in Alberta at $80K is 30.5%, and the OAS clawback is 15%, so that the true marginal tax rate is 30.5% + 15% = 45.5%. At $98K, Alberta's MTR jumps up to 36%, so that the MTR + OAS = 51%. At about $130K, the MTR+OAS rate drops to 36% because the OAS has been completely clawed back. So the key numbers for Albertans are 45.5%, 51%, and 36% in the taxable income zone where OAS applies. (And if an MTR of +50% doesn't get your attention, nothing will.) In Alberta we don't have a specific health care tax or premium, but some other provinces like Ontario do, and these premiums can be based on taxable income too, so you can throw this into the calculation as well.
At a minimum of 130K of taxable income in retirement is a good position to be in. I don't think you would be too concerned about all of the OAS being clawed back but good advice if you don't need all of this taxable income and you can reduce it by withdrawing the minimum. I suppose if you had a very healthy TFSA as well, you could withdraw from the TFSA, if you absolutely needed the 130K, to reduce the taxable income and gain back some of the OAS.
So to get it right, for younger Canadians, normal personal salary income (not pension income) cannot be split between spouses unless the higher income spouse contribute to their lower income partner's RRSP/TFSA or to give them out a loan and charge interest, right?
Thank you Adam. You're explanation is very informative.
I believe before age 65 there is a three year delay on drawing on a Spousal RRSP otherwise the contributor has to claim the last three years of deposits. So you cannot deposit this year and try to take that out through the spouse next year, - three year delay. So you need to plan on stop contributing to the spousal RRSP three years before needing to withdraw the funds.
Outside of RRIF min.
That's calendar years, so it is less than 365 days x 3. For example, if the last deposit is on Dec 2020 by the higher income spouse, the earliest withdrawal that can be attributed to the lower income spouse is on Jan 2023.
What is it when you wait 3 years, the lower income cashes Spousal RRSP out in year 3, so when can the higher income earner contribute to the Spousal RRSP again?
Pure gold Adam. Like the others, I always learn something new in these videos.
So is income splitting only for pension or can it also be applied to wages?
When is the benefit of pension splitting negated by an increase in the receiving spouse’s income? We benefit from pension income splitting but need to decide whether the receiving spouse should take CPP at 60 and/or withdraw from RRSP. Your channel is invaluable - thank you.
Great video and very important advices..!!! Thanks very much.
Thanks for the clear explanation
Happy to help
Can you Income Split/Share the OAS benefit?
Great insight as usual. Thanks Adam!
Another great video . Thank you
Thanks Adam! Learned something new yet again! My wife has a DB plan, good to know this can be split at any point should we decide to retire early.
Glad it was helpful!
Thank you Adam, your videos are very helpful.
Glad you like them!
Thank you so much for the video. I am starting a career in the next year or two where I will owe taxes (it’s about 85k) my partner doesn’t work. It’s basically almost exactly what you used as an example. I’m trying to plan now to save money. How much would it be to sit down and go over a solid plan. I know I could watch videos but I’m young and new to all of this. I am a resident of British Columbia as well. Thank you
Hi Adam, thanks for the great video. This is the first time I came across your Channel, so I just subscribed. I am eager to look through your archives to see if you have any materials relevant to helping cross-border families with financial planning. Or for Canadian snowbird families…
I am confused, I thought you could only income split pension money not regular income from a job. We are in Ontario
Can you do a video on:
For BC deferred property tax when 55 and older? 2022 one spouse is 55 in January & one spouse is 55 in October, do both have be 55 at July 3rd 2022? And have a child. If so then put the money that we used to put away for property tax as extra bi-weekly payments.
I see the rates, so if 55 then just apply for regular program?:
Regular Program 0.45%
fees 1st yr $60
fees following yrs $10
Families with Children Program 2.45%
Financial Hardship Program 2.45%
GIS is meant to help people in dire need, not pad someone’s already cozy nest egg.
Thx Adam! ✌️
Thanks Adam!
You are welcome Reg. Thanks for watching.
I think this income splitting is a great strategy. Why would the government(s) allow us to pay LESS in taxes? What am I missing here? Great video by the way! Thanks for sharing.
It does seem weird...but it's the rules so take advantage while they are here!
@@ParallelWealth Definitely will! Cheers.
Thx Adam... learning more from each of your videos. Greatly appreciated!
In a high/low family income situation, you mention that one spouse can pay all of the family expenses leaving the low-income spouse with more money to invest in a non-registered account. I understand that the low-income spouse's expenses can include income taxes, so that it is possible to leave the low-income spouse with 100% of their gross income to invest. The question is, how do you prove to CRA that you are following this strategy? Is it necessary to run separate bank accounts for each spouse? (Granted, this strategy doesn't really apply to very many average total incomed families, i.e. middle-class families.)
You could run separate banks, or tax returns plus deposit history should suffice.
Thanks for the great videos. Do both members of the couple need to be over 65 to split?
Nope, just the person splitting the income
Hi Adam, absolutely useful information on the topic. Following your advice, I downloaded the form T1032, but it’s pension splitting form. Do I need a different form to split my wage/salary income with my wife? Thanks a lot.
Is income splitting allowed from an RRSP or RRIF if one partner has all of the income and is over 65, and the other has very low income and is under 65?
Great ! I might need ur help on tFsA rrsp accounts - where to keep US stocks and Canadian stocks etc and also on tax saving strategies , do u provide live classes or provide service . I shall be arriving in canada soon , any offers for new immigrants ?
Hey Adam, would it be safe to assume that if one spouse's pension (RIF) income is being used (before 65) and the other is not, that the personal tax credit ($15K) can be taken advantage of by the spouse with the RIF income to reduce taxes? AND, is that a good strategy, or is it better to withdraw money from each of the pensions (my RIF and her spousal RRSP) to get the best tax refund? Thanks!
OK can I go back and redo past years taxes? Using income splitting this time around.
You are amazing. Always Nice and important videos
So proceeds from a DC Pension plan can't be split before age 55 (converted to a LIF)? Also, LIRA's can't be split before 55? Only DB pension plans?
Income splitting is for 65 pensioner, if still work after 65, I we do income splitting?
Do you know what line on the tax return does CRA look at for the OAS clawback?
Thanks Adam. Just to clarify can you split pension income in the tax year you take retirement ( prior to 65) if it is part way through the year?
Yes.
I have a defined contribution plan at work and plan to retire pre-65. I believe that rolls into a RIF om retirement. can I draw on that and income split before 65?
Not before 65. And yes it will roll to locked in rrsp and then locked in rrif.
Can we apply income spliting for the working after 65?
Yes, as long as it's income that qualifies for income splitting. Employment Income is not one.
Thanks for the video which I can probably use the info in 10 years or so! I was curious to know if you have any video for a self-employed wife who's making $95K and her husband managing her accounts and would like to get paid from wife. Can she issue a T4 for him in her T2125?
Will all depend how you have things set up. I would have a chat with your accountant.
Is it a good idea and possible to live in Canada on 3/4 paid off houses? And have no other income? Just the rental income (pure).
It could be...pretty limited info here!
Very informative 👍🏻video but I am still confused
I am long haul truck driver living in Manitoba earned 107K in 2022 on payroll. My wife is not working and have a6 years old child.
So can I split my income between me and my wife ?
No, only income from a pension plan (any age) or RRSP past age 65. There are a few other accessories as well, but those cover the basis for most. Employment income can't be split.
@@ParallelWealth thanks for clarification.. now I understood 👍🏻👍🏻👍🏻
So if I put my last payment into my spousal RRSP in Dec 2021. Would the earliest withdrawal be Jan 1, 2025 for my spouse to take it out and where my spouse would claim it as taxable income. Total put in 2021 would be $20,000. What would happen if my spouse took out $20,000 in Dec 2024.
Dec 2024 would be taxed to you. Jan 2025 to her
She can withdraw early as Jan 1 2024 but can’t contribute into her rrsp until Jan 1 2025 that what I understand about 3 year attribution rule. I could be wrong.
My hushand passed away a few years ago. I now have to claim all income on my return. What can I do to minimize taxes?
Sorry to hear Rick. I have a couple videos to help with this, but singles are definitely at a disadvantage for taxes in retirement.
@@ParallelWealth you have mentioned a few times that singles are at a tax disadvantage over couples? I must be missing something. Are you saying it is unfair that a single person earning, say, $80k, should pay the same taxes as a couple earning the same amount? The GIS is based on family income, shouldn’t total taxes paid also be based on total family income?
@@bl9531 Each individual files taxes separately in Canada, even when married. Having a spouse allows income splitting and can result in a lower tax bill. That is what this video covers. Yes, some benefits are tested using total household income, like GIS and CCB.
@@MrKaterman - who said that individuals don’t file their own income tax?- having a spouse allows pension splitting, not income splitting- at the same time, many deductions are based on combining income - the Guaranteed Income Supplement is one example. Btw, if a couple divorces the same pension gets split.
Quick question Adam... is there an optimal $ amount to move from my RRSP to RRIF starting at age 65 to age 70? (assume $100k available to move over during those 6 years).
Also, can we Income Split when the money is withdrawn from an RRIF and is there a max $ allowed to split?
Thx again.
Money from RRIF past 65 can be split. As for the first question, there is no magic number. Do the whole thing as long as the min isn't more than you need.
Hi Adam,if I am 65 and she is 61,can I still split the RRIF with her? Thank you for your time.
My wife hasnt worked for over a decade and I have made 6 figures each year, recently 200k, why has my accountant not mentioned this? Is there something that makes you inelligable?
Ia it retirment income? Not all income can be split. But start using a spousal RRSP if you can
Pro tip - thanks!
Don’t forget about the 3 year attribution rule for spousal RRSP’s.
I am in a dilemma with this one. Would it work if the spouse is an American citizen.
What is that rule?
@@mattstevenson2425
There's a 3-year attribution rule, which means contributions to a spousal RRSP can't be taken out for at least three years after the date they were put in. If the funds are taken out within 3 years, the money becomes taxable income for the contributing spouse.
Thank you for the clarification
@@doconawalk9367 is this wrt to US citizen spouses? Thanks for the response. I love this forum!
Birthday is in December. Can I split any pension income received during the year that I turn 65?
Yes
My partner is 6 years younger than me. Can we still income split when i am 65 and she is 59?
With the right types of income you sure can!
Do both have to be 65?
Nope, just the person splitting the income
thank you
1. If wife working, Husband not working (65) can she split Employment income with Husband?
2. If wife working Husband not working (64) can she split Employment income with Husband
Can a spouse who is over age 65 split their RRSP with a spouse who is under 65yo? And I don't mean 64yo. Let's talk people with a decade or more apart in age.
Also, could you talk about TFSA and RRSP strategies for one spouse who is 65+, the other is under, AND the household still receives the Canada Child Benefit. So Adjusted Family Net Income still matters to the household finances. (Yes, you can be 65 and have a child under 18. ;-) )
Yes!
LOL - yes will go through this more down the road.
Single people need representation! We are sick of subsidizing couples.
I have a couple videos on this, but very few tax advantages compared to couples.
@@ParallelWealth Thank you for the videos, but what we need is policy change!
@@gerardacronin334 can't disagree.
I really like that scenario of the wife making $140,000/year and the husband making $0. I will now see if my wife agrees. ;)
🤣🤣🤣🤣🙋♂️🙋♂️
Hi. How I can contact you?
Thank you for another great video.