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While
no new details were provided, the budget confirmed that the
government will enact the pension income splitting provisions
announced on October 31, 2006 in the Tax Fairness Plan. Commencing
in 2007, Canadian residents receiving pension income that
qualifies for the pension income credit can allocate up to
half of this income to their spouse or common-law partner.
The transferor will deduct the amount allocated and the transferee
will include the amount allocated. Both parties must agree
to the allocation in their tax returns.
For
individuals age 65 and older* the following qualify as eligible
sources of income:
| 1. |
A
life annuity out of a Registered Pension Plan (RPP) |
| 2. |
Annuity
payments out of an RRSP |
| 3. |
Withdrawals
from a RRIF |
| 4. |
Annuity
and installment payments out of a Deferred Profit Sharing
Plan (DPSP) |
| 5. |
Income
from some foreign pension arrangements and U.S. IRAs |
| 6. |
The
interest element of a non-registered annuity contract
(prescribed & non-prescribed) |
| 7. |
Accrued
(interest) income from a non-registered deferred annuity
contract such as a GIC with an insurance company. |
*A
life annuity from a RPP also qualifies for the pension tax
credit for any individual under age 65. Payments described
in items 2 to 7 may also qualify for the credit under age
65 if the income is received because of the death of the individual's
spouse.
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