If you receive payments from a CSS Variable Benefit (VB) account, those payments may be eligible for pension income splitting.
VB payments are eligible for income splitting provided they meet the following criteria:
You are age 65 or older in the tax year you report the VB payment on your tax return, and
The VB payment is reported in box 018 of the T4A.
Members who receive retirement income from the CSS Pension Plan will receive a T4A slip in early 2022. Your T4A slip is required when you file your income tax return. All regular monthly and annual VB payments and all lump-sum income payments from a VB account are reported in box 018 of the T4A and are treated the same as eligible pension income.
Pension income splitting is an appealing tax strategy for retirees looking for a way to significantly reduce the amount of income tax they pay.
By transferring pension income from a higher-earning spouse to a spouse in a lower tax bracket, you could potentially save thousands of dollars. Keep in mind the income is not actually transferred from one spouse to another but is recorded on paper only for income tax calculating purposes.
For more information on income tax reporting for retirees, please visit the CRA website.