Income splitting is important for everyone, and especially so for senior citizens. If you receive Old Age Security (OAS) benefits, your entitlement is clawed back at the rate of 15% of your taxable income in excess of $53,215. Splitting income between seniors reduces the total amount clawed back as well as saving on their income taxes.

Consider that when you contribute to a spousal RRSP, withdrawals from the RRSP by your spouse will be taxed in your spouse’s hands, if you have not made a contribution to the RRSP within the previous two years, or if the RRSP has been converted to an annuity.

If you contribute to a spousal RRSP and your spouse also has earned income, they should also contribute to their own RRSP.

Spouses should consider electing to split CPP benefits 50/50. This is beneficial in situations where only one spouse has worked and is receiving a pension. Diverting half of your benefits to your spouse will not result in income attribution as this is specifically excluded from the rules.

Remember to invest the CPP benefits received in your spouse’s name since income earned on the accumulated CPP benefits will not be subject to income attribution.