Tax Relief for Canadian Seniors

The Canadian government has implemented a "Tax Fairness Plan" that delivers some tax relief to seniors. The first part of the plan involved enhancing the Age Credit Amount in 2006.

The 2007 tax year brings something new (and I think historic) to Canadian taxation: recipients of certain types of pension income will be permitted to share that income between spouses to save on the overall tax bill. Income "splitting" has always been possible in the United States with the use of the "Married Filing Jointly " filing status, but it is something new to Canada. It should provide welcome relief to seniors who for the most part receive the worst kind of income for tax purposes, straight pension income with few deductions allowed.

There appears to be wide-spread confusion, at least among my tax clients, about what type of income can be split. According to the Department of Finance, RPP, RRSP, and RRIF income can be split, but payments from OAS, CPP, QPP, and certain RCAs will not qualify.