Main legal tools
| Strategy | Best for | Key point |
|---|---|---|
| Pension income splitting | Eligible pension or RRIF income | Joint annual T1032 election, generally up to 50%. |
| CPP pension sharing | Couples with CPP in pay | Service Canada calculates the share; it is not a tax-return election. |
| Spousal RRSP | Uneven future retirement income | Long-term balancing; attribution timing matters. |
| Prescribed-rate spousal loan | Non-registered portfolios | Formal loan, prescribed interest, and on-time annual payment. |
| TFSA funding | Unused spouse TFSA room | No deduction; receiving spouse owns the account. |
| Household expense allocation | Unequal incomes/assets | Higher earner pays expenses while the other invests their own funds. |
Pension income splitting
Spouses or common-law partners may jointly elect on Form T1032. The transfer changes tax reporting, not who receives the pension cheque. Registered pension life annuities are generally eligible; RRIF/LIF income commonly becomes eligible when the transferring taxpayer is 65 or older at year-end. CPP and OAS cannot be split this way, and ordinary lump-sum RRSP withdrawals generally do not qualify.
The couple may choose a different percentage each year, up to 50%. The maximum is not always optimal: check combined tax, both spouses' OAS recovery, and pension-income credit results.
CPP pension sharing
CPP sharing changes actual payments and tax slips. Service Canada calculates the allocation using CPP rules and the period lived together during the joint contributory period. Combined entitlement does not increase. This differs from CPP credit splitting after separation or divorce and may end after separation, divorce, or death.
Spousal RRSP
The contributor receives the deduction, while the spouse owns the plan. It can balance future RRIF income and improve flexibility before 65.
Prescribed-rate spousal loans
The higher-income spouse lends funds at at least CRA's prescribed rate; the lower-income spouse invests them. Use a written agreement, pay interest every year by January 30, track income and expenses, and keep a separate investment account. A missed deadline can cause the attribution exception to fail.
TFSA funding and household expenses
A spouse can generally provide funds for the other spouse's TFSA when that spouse has room. Income inside the TFSA is tax-free, but later transfers back into a taxable account can raise attribution and tracing issues. Separately, a higher-income spouse can pay household bills while a lower-income spouse invests their own earnings or pre-existing capital—records should prove the source.
Family business income
Salary must be reasonable for actual work. Dividends, fees, and share ownership require Tax on Split Income review. Adding a spouse to an account, gifting taxable investment cash, paying unreasonable salary, splitting OAS, or assigning RRSP withdrawals usually does not achieve a valid split.
Retirement planning checklist
- Identify each income source and the permitted method.
- Compare both spouses' marginal brackets.
- Check OAS recovery tax for both spouses.
- Treat GIS separately; couple GIS commonly uses combined income.
- Watch the December 31 age test for RRIF/LIF income.
- Model combined tax, after-tax cash flow, credits, benefits, and the survivor position.
Official sources
Educational planning guide only—not tax, legal, or investment advice. Rules and administrative practices change; verify current official guidance before acting.