Splitting Pension option

[Gil]

Does anyone know where in the 2020 tax year program, is the choice to choose to split your pension income or not to split your pension?

The 2020 program wants to split my pension income and it is not beneficial to do it.  How do I stop the program from splitting the pension income?

In the 2019 program it was in the interview section or the Controls.

[Nawal]

Hi @Gil, please follow these steps:

1. On the "Left-side menu on the Interview tab", select "Interview setup".

2. On the screen that appears on the right, go to the "Pension" group and check the box "Pension income, other income and split pension income (T4A, T4A(OAS), T4A(P), T4A-RCA, T4RSP, T4RIF, T1032)". 

3. Return to the "Left-side menu on the Interview tab" and select "Pension income, T4A".

4. On the page appearing to your right, click on the plus sign "+" icon to the right of the line "T4A - Pension, retirement, annuity and other income".

5. On the screen to the right, choose "Split pension income with your spouse".

6. On the page that appears, for the line "Do you wish to split eligible pension income with your spouse?", choose the appropriate option from the drop-down menu. For Quebec residents, complete the second section that is specific to Quebec.

 

[Curmudgeon]

Are you sure splitting is not beneficial? Compare total tax before and after split. It gets complicated because of OAS and age credit clawbacks.

[AltaRed]

I've seen at least a few instances on financial forums where people have brought up that issue. It must be a set of somewhat unique circumstances.

What I have advised people to do is as you suggest. Let Maxback optimize and then do a case with zero split to be sure.  If the zero split works out better, then one needs to iterate between 0 and Max to find out where the optimum is. I now do a zero split case just in case.....

Regardless, UFile needs to re-visit and QA the algorithms for those particular circumstances.

[Steve596]

Ufile has decided not to split my pension income for some reason. How do i override this? I have already changed it to "Transfer to spouse (if eligible)" and added the correct amount to transfer. I am going to guess it feels like I am not eligible.... How do I change that or tell ufile it is wrong and that I am eligible??

[Curmudgeon]

Did you try MaxBack to see if it finds a split?

[Billy-Bob]

I have tried Nawal's suggestion but it does not work. (I've tried all of these suggestions too.)

[ersmith]

Just had this same issue. couldn't understand why MaxBack assigned split pension amount to higher earning still employed spouse. Followed Nawal's suggestion above and was able to try with and without splitting. Turns out MaxBack was correct and resulted in approx $300 tax saving for us.

[Curmudgeon]

This is usually because of the OAS clawback. Say spouse1 has taxable income of $130,00 and marginal rate of 26%. At that income all OAS has been clawed back. Spouse2 has taxable income of $80,000 and a marginal rate of 20.5%. Spouse2 is in the OAS clawback range where OAS is clawed back at the rate of 15%. This is a marginal rate on OAS of 35.5%. Shifting pension from spouse2 to spouse1 more than compensates for the higher marginal tax rate.

Other factors like the seniors tax credit which is income related also come into play. There are common misconceptions that the lower marginal rate spouse should always receive the split or that the optimal split is always 50-50.