Income Splitting

A ) Make sure both spouses will have same annual income when they retire.

Use Spousal RRSP's to help achieve this goal. If neither spouse will have a pension from their employment when they retire, then both spouses should try to have the same amount in RRSP's. If one spouse will have a pension, then the other spouse should have a greater amount in RRSP's.

The spouse making the contribution gets the deduction from income when the contribution is made. However, if the funds are withdrawn within 3 years of the contribution, the withdrawn amount will be taxed as income to the spouse who made the contribution.

B ) Split income by employing your spouse.

If you are self-employed, you can employ your spouse. The spouse must be paid a reasonable wage for services performed.