Optimization of pension income splitting

This version of DT Max takes into account the recent rules regarding pension income splitting. DT Max takes all the elements into account to determine the amount of pension income to be transferred between spouses. First, the program will attempt to balance the taxable income for both spouses and then will assess the global consequences of the split. The major difficulty resides in determining the optimal amount that will allow the spouses to maximize their combined tax amounts.

Many factors must be considered:

• This transfer is limited to 50% of the pension income;
• The tax amount related to the transferred pension income amount must also be transferred according to the same ratio;
• Some types of pension income cannot be transferred due to the pensioner's age;
• The rules differ between the provincial and the federal.

Among other things, pension income splitting will have repercussions in the results obtained from the calculation of several tax items:

• The pension income amount (federal: line 314, Schedule 1);
• The amount for retirement income (Quebec: line 27, Schedule B);
• The social benefits repayment (federal);
• The contribution to the health services fund (Quebec);
• The Ontario health premium;
• The medical expenses tax credit;
• The dividend tax credit;
• The foreign tax credit;
• The carry-over of alternative minimum tax, and many more.

To modify the amount of split income calculated by DT Max, use the keyword Optimize by selecting the federal option "T1 - Pension income splitting" and the Quebec option "TP1 - Schedule Q - Pension income splitting". As per the choice made, the program will recalculate both spouses' returns while abiding by the tax rules regarding pension income transfer.

A "Report on split-pension income" form has been developed to allow the user to view the negative as well as the positive consequences from the choice to transfer pension income between spouses, by comparing the results before and after the transfer.