Conditions for Pension Income Allocation
You and your spouse or common-law partner may allocate qualifying pension income between yourselves, provided the following criteria are fulfilled:
- You were legally married or in a recognized common-law relationship during the tax year and were not living apart due to a breakdown in the relationship for 90 days or more starting within the year and continuing through the end of the year (refer to the note below for more detail).
- Both individuals were Canadian residents as of December 31 of the tax year; or
- If one partner passed away during the year, they were a Canadian resident on the date of death; or
- In cases of bankruptcy within the year, the individual was residing in Canada on December 31 of the year when the bankruptcy tax period ended.
- One of the partners received pension payments during the year that are considered qualifying for the pension income credit.
What Types of Pension Income Qualify?
Pension income that typically qualifies for splitting includes the following amounts, which also meet the criteria for the pension income credit:
- Taxable amounts from life annuity disbursements linked to a superannuation or pension plan or fund.
- For those who are 65 or older at year-end—or if the payments were received following the death of a spouse or common-law partner—the following also apply:
- Payments from annuities or registered retirement income funds (RRIFs), including life income funds (LIFs);
- Annuity income received from registered retirement savings plans (RRSPs);
- Certain payments received from retirement compensation agreements.
Types of Pension Income That Do Not Qualify
The following sources of retirement income are not eligible for income splitting between spouses or partners:
- Payments from Old Age Security (OAS);
- Benefits from the Canada Pension Plan (CPP) or Quebec Pension Plan (QPP);
- Pension income from other countries that is exempt from Canadian taxation due to a tax treaty, which allows for a deduction on line 256;
- Distributions from a U.S.-based individual retirement account (IRA);
- Transfers from a RRIF that are included on line 115 and subsequently rolled into an RRSP, another RRIF, or an annuity.