Canadian Personal Finance Blog

So the only reliable and fool-proof way in Canada to income split (and if you think there are other ways, e-mail me or leave me comments) is by using the concept of the Spousal RRSP. The advantage of a canadian spousal rrsp is that you can put money away for your wife or husband if you think you will have income as well, and thus leave both of you (hopefully) drawing income in much lower tax brackets. This is the only way (I know of) in the eyes of revenue canada to split your income legally.

What do I mean? In my case it is pretty simple, currently I work for a company with a very generous pension (now whether I make it to retirement here is another subject for another time), but let’s assume that I do get to retirement and draw my pension (which hopefully still exists), if I have also put away money in an RRSP for ME, all income for me and my lovely wife comes in in MY name (and thus all income is added together and most likely vaults me into a higher tax bracket). If, however, I have put all my RRSP money in a spousal RRSP, the RRSP moneys (which are most likely now in a RIF or some pay out scheme) are taxed in my wife’s hands at a much lower tax rate! Great eh?

Now this is a quick overview of the spousal RRSP, I will put together a few concrete examples in the next few days to outline this, but since tax season is almost over, I figured this might be a good topic to bring up, and start discussion on. There are also other interesting features of the spousal RRSP to discuss, which I will bring up as well. Stay tuned.

–C8j