Why does Pension Splitting work
Pension income splitting, works because “progressive” tax system, in which the applicable tax rate goes up as income rises. For 2018, the federal tax rate of 15% is applied to about the first $47,000 of taxable income. The next tax rate is 20.5% applied to the next $46,000 of taxable income. A couple could split their income take advantage of the lower rates. In addition, both members could take advantage of the pension tax credit.
Over the age of 65.
Income tax is a big-ticket item for most retired Canadians. Especially for those over 65 the annual tax bill may be your single biggest expenditure. The Canadian tax system provides a number of tax deductions and credits available to those over the age of 65. Like the age credit or the pension income credit, splitting pension can minimize the tax burden.
Tax Saving Strategy
Pension Splitting is another income tax saving strategy which is not nearly as well-known. The fact that the benefits of this strategy aren’t readily apparent from either the tax return form. Ask your professional tax planning or tax return preparation expert how much can you save in tax.
About Expert Fiscaliste
Expert Fiscaliste provides Canadian and international income tax preparation and consulting services to individuals, businesses, and trusts. If you want to take advantage of pension splitting in your 2018 Tax Return. Give us a call at 514-954-9031, or visit our Contact Tax Experts page.
