Biased Income Splits

Advisor's Edge

2007-02-18

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One of the most significant tax changes for 2007 was the announcement last fall by the Conservatives to permit pension income splitting.

The rules governing the type of income that can be split mirror the rules for definition of "pension income" in the Income Tax Act and, as currently drafted, tend to discriminate based on both plan type and age.

Specifically, registered pension plan recipients can split their pension income at any age whereas registered retirement savings plan pensioners are forced to wait until age 65 and either annuitize their RRSP or convert it to a registered retirment income fund in order to split their pension income or qualify for the recently doubled $2,000 pension income credit.