What is pension income splitting?
Pension income splitting is an important mechanism, and should be a feature in any Canadian financial planning software, that allows to transfer the taxable eligible pension income from one spouse to another for the purpose of decreasing their joint tax liability.
The pensioner is the individual who receives eligible pension income and who elects to allocate part of that income to his or her spouse or common-law partner called the pension transferee.
Automated pension income splitting
Snap Projections financial planning software has a powerful feature that allows you to automatically perform pension income splitting for your clients, so you no longer have to go through the process manually. That’s the advantage of a financial planning software – it fully automates the tedious parts of planning for you!
Unless you choose to suspend Automated Pension Income Splitting in your scenario, Snap will calculate the optimal amount of taxable income to be shifted from one spouse to the other, up to the allowable maximum in each year.
Defined Benefit pension income, RRIF income, and LIF income are all eligible for splitting.
This way, without any additional work, you can help your clients minimize their total tax liability. This leads to instant savings for your clients.
With the automated Pension Income Splitting, you will see the exact amount being split for each year as a negative value in a client’s scenario page, and a corresponding positive value in the same column on the spouse’s scenario.
You can see the impact of the income splitting by examining the Marginal Tax Rate and the Effective Tax Rate within your projections.
Automated pension income splitting will only income split if this makes sense for the client. If the clients wouldn’t benefit from income splitting, the income splitting column will contain $0 values.
John’s personal planning page
Jane’s personal planning page
Next steps
If you would like to learn more about automated income splitting feature in Snap Projections financial projections software, click here to book a demo call with us.
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