CPP Sharing Explained: Does It Make Sense For You?
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- Опубліковано 7 бер 2024
- In this video I'll go through how CPP Sharing works, and if it's something that you should look into when you retire.
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The spouse with the higher pension/RRIF earnings is likely going to be collecting more CPP as well. As I understand it, you cannot pension split more than 50% (i.e. you can't pass more than half your RRIF/LIF/Pension income to your spouse), so CPP sharing will likely be of benefit, particularly if you have been married a long time.
Thanks Adam! Was an area where I had some knowledge gaps.
We have CPP sharing. I have a pension, she does not. Helps a little after pension income splitting.
I’ll share mine with me, myself and I, when I receive it!!!!
Can you make use of both: CPP share and then CPP income split after the sharing takes effect?
Canwe use CPP sharing and also make use of income spliting? We are both over 65 and my CPP and other retireent pensions are greater thzn my wife? Thanks for this video.
Always good advice, Thank You. With CPP Income, I think I figured out that its 2% per year of knowing your spouse. Or at least I think I understand it. For example, If my wife and I have been married for 30 years when I start to take my CPP at 65 and she has already started to receive her CPP, I would be able to split 60% of my CPP between me and her. Is that how that calculation works? Another question is does that formula change with each year were together? When I am 70, the formula would be splitting 70% as we have known each other 35 years? or does it stay at 60%? It talks about knowing each other but it seems to me that is hard to prove that you were a couple other than having a marriage certificate? Is that typically the case?
Great video! I didn't know about sharing being prorated to how long you've been married. Can you income split on your taxes without having to "physically" share your monthly deposits?
Taxes
what if spouse has no CPP. can it still be split??
Short answer is yes you can share 1 CPP amount . The below is taken from the government of canada website.
There are 2 ways to share a pension:
if only 1 of you contributed to the CPP and/or the Quebec Pension Plan (QPP), you can share the 1 pension
if both of you contributed, you and your spouse or common-law partner may receive a share of both pensions. The combined total amount of the 2 pensions stays the same whether you decide to share your pensions or not
The portion of your pension that can be shared is based on the number of months you and your spouse or common-law partner lived together during your joint contributory period. This period is the time when either one of you could have contributed to the CPP and/or QPP. Your Statement of Contributions has all the details about your contributions.
it is too complicated, why not just create a line in the tax filing, where you can move any amount of CPP benefit to your spouse? no more application, approval, bureaucracy, just create a line when you report tax. problem solved.
It definitely would be easier if this income was eligible for pension income splitting at tax time but it falls into the "Not eligible category"
The following amounts received by the transferring spouse or common-law partner are not eligible for pension income splitting:
- old age security payments
- Canada Pension Plan and Quebec Pension Plan
- any foreign source pension income that is tax-free in Canada because of a tax treaty that allows you to claim a deduction at line 25600 of your return
- income from a United States individual retirement account (IRA)
- amounts from a RRIF included on line 11500 of your return and transferred to an RRSP, another RRIF or an annuity
I looked into this before and don't understand the need to do this. I have come to the conclusion it just potentially protects against the government changing the income splitting rules for retirees. Then again they could also change these CPP sharing rules at the same time and therefore you are at their mercy anyway when it comes to retirement income splitting.
I would assume CPP income sharing wouldn't be beneficial to a couple if you were both in the same marginal tax bracket either since you would be transferring the income and paying the same amount of tax from that income just in the other person's hands... For instance in BC if you were both between $55,867 and $95,875 2024 taxable income threshold then you would both be paying 28.2% marginal tax and it would be a wash. Only difference would be who reports the income and pays the tax. So it isn't necessarily the goal to both have the same reported income --- more so the goal would be to be as close to the max as possible, without going over, in the income tax bracket threshold for your jurisdiction. Correct?
The edge case, as explained in the video is OAS clawback. For 2024, clawback begins at $90,997. If you and your spouse were able to split income perfectly to $83,000 each - with the exception of OAS. Your OAS is $1,000 per month and hers is $200. Final incomes: $95,000 and $85,400. Both are in same 28.2% marginal tax rate - but you get a OAS clawback of $95,000 - $90977 = $4,023 x 15% = $603.45. CPP sharing could have resulted in both incomes being $90,200 would result in same total income tax owing - but no OAS clawback.
Sorry, typo. It should read CPP. " exception of CPP. Your CPP is $1,000 per month and hers is $200."
Thanks @@robthesailor Your example makes perfect sense - So in the end, one does not only have to worry about the income tax thresholds but the OAS clawback threshold as well when considering to officially request to share CPP or not. In your case the upper threshold one should be considering would always be the OAS clawback threshold if you are around that level of retirement taxable income level in any particular year.
Yup @@robthesailor I knew what you meant... Thanks.