Smart Tax Strategies for Retirees: Income Splitting

Smart Tax Strategies for Retirees: Income Splitting

Income tax is one of the largest expenses any retiree has. The Fraser Institute Report indicated that Canadians paid 45% of income as taxes in 2019.  Your goal in retirement should be to organize your income stream to: reduce the amount of tax you may have to pay  preserve any government tax credits preserve government income plans such as Old Age Security  The result will be greater spending for you today, and potentially greater wealth for the next generation. A smart tax strategy to reduce a family’s overall tax burden is to split the income. This means to shift income from a spouse or common-law partner (CLP) who is in a higher tax bracket to one who is in a lower tax bracket. The result is lower overall income tax paid, resulting in increased spending and/or preserving your wealth. The various income splitting strategies to review are: Pension Splitting CPP Sharing Spousal Loans Spousal RRIFs Base the RRIF minimum on the younger spouse’s age TFSAs Pension Splitting  This is a strategy for a spouse/CLP to...
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