Do Common Law Partners Qualify for Income Splitting in Canada?
Yes — common law partners can qualify for income splitting in Canada so long as they meet the Canada Revenue Agency’s definition of a common-law relationship (typically living together in a conjugal relationship for 12 consecutive months, or sharing a child). That means eligible common-law couples can access pension income splitting, spousal RRSP strategies, and CPP sharing just like married couples — and Retirementize models these situations automatically so you can see the real after-tax impact.
What does the CRA consider "common law"?
For tax purposes the CRA treats you as common law if you and your partner have lived together in a conjugal relationship for at least 12 continuous months, or if you share a child by birth or adoption. Once you meet that test, CRA generally treats you like a married couple for many tax provisions — including pension income splitting. This matters because your formal marital status on December 31 of the tax year is what CRA uses when applying many rules.
So — what kinds of income can a common-law couple split?
Once qualified as common law for tax purposes, the couple may use the same statutory tools available to married couples:
- Pension income splitting — allocate up to 50% of eligible pension income to your partner on the tax return.
- CPP pension sharing — apply through Service Canada to share CPP retirement pension amounts.
- Spousal RRSPs — during working years you can contribute to your partner’s RRSP to smooth future retirement income between you.
Quick example — numbers that make it obvious
Imagine Dana (age 67) receives $48,000/year from a defined pension and Casey (age 66) receives $8,000 from part-time work. If Dana splits 50% of eligible pension income ($24,000) to Casey, the household taxable incomes become roughly:
- Dana: $24,000
- Casey: $32,000
Because Canadian tax brackets are progressive, the couple pays less tax overall than the pre-split scenario. That tax saving can be used for travel, healthcare, or boosting TFSA contributions. You can plug these exact numbers into the Retirementize calculator to see line-by-line tax, OAS interaction, and lifetime cashflow differences.
Common-law vs married — any gotchas?
For most practical purposes they’re equivalent for pension splitting — but watch for:
- Timing of the relationship: CRA looks at your status on December 31. If you only started cohabiting 11 months ago, you won’t be considered common law that tax year unless you share a child.
- Proof of relationship: If CRA ever audits an election, be ready with evidence of cohabitation (shared address, joint bills, leases, statements showing shared responsibilities).
- Residency: Both partners generally should be Canadian residents for tax purposes on December 31 for some rules to apply.
Pension income splitting — the mechanics (short and sweet)
Pension income splitting is an election on your T1 tax return. Up to 50% of eligible pension income can be transferred from the higher-earning spouse to the lower-earning partner. The transferring partner deducts the amount, and the recipient includes it in their income. Both partners must agree and complete the required lines in the return.
Not every dollar of retirement income is eligible — employment income and many investment incomes are excluded. See our deeper dive: what income can be split between spouses in Canada.
CPP sharing — it’s related but handled separately
Canada Pension Plan (CPP) retirement pension sharing is a distinct mechanism. Couples who receive CPP can apply through Service Canada to share the CPP retirement pension. This is an administrative application with its own rules — it’s not the same as CRA’s pension income splitting election, but the effect is similar: redistribute retirement income for tax efficiency. For details, see our article on pension income splitting and check Service Canada guidance for CPP sharing.
When should common-law couples consider splitting?
Income splitting is most useful when one partner’s income is significantly higher than the other’s — especially in retirement when pensions, RRIFs, and CPP kick in. Use splitting to:
- Avoid or reduce Old Age Security (OAS) clawbacks for the higher earner.
- Preserve income-tested credits and benefits for the lower-income partner.
- Smooth RRIF withdrawals so you don’t spike into a higher marginal tax bracket in any single year.
Try scenarios for your household with Retirementize — it models OAS interactions and pension splitting automatically.
Practical tips & checklist for common-law couples
- Confirm you meet CRA’s common-law test (12 months cohabitation or shared child).
- Identify which incomes are eligible for splitting (pension, RRIF after certain ages, annuities).
- Model the tax and benefit outcomes — include OAS, GIS, and provincial credits.
- Make the joint election on your T1 (both must agree and sign) each year you choose to split.
- Keep records that demonstrate your common-law status in case CRA asks.
Fun Facts
- Common-law partners are treated like married couples for many tax rules, including pension income splitting, once they meet CRA’s definition.
- You usually become common-law for tax purposes after 12 consecutive months of living together — shorter if you share a child.
- Pension income splitting lets you transfer up to 50% of eligible pension income each year.
- CPP pension sharing is applied for via Service Canada and is distinct from CRA’s pension splitting election.
- Income splitting is an annual election — you can choose to split (or not) each tax year depending on what the math says.
FAQ — quick answers
Q: Do we need to be legally married to split pension income?
A: No — common-law partners who meet CRA’s test qualify the same as married couples.
Q: Is CPP sharing automatic?
A: No — CPP sharing requires an application to Service Canada.
Q: Can splitting ever be bad?
A: Rarely — but it can affect benefit thresholds (OAS/GIS) in edge cases. Always model your specific numbers.
Conclusion
In short: common-law partners who meet CRA’s definition generally do qualify for income splitting tools such as pension income splitting and CPP sharing. These mechanisms can produce meaningful tax savings and help protect income-tested benefits. The smartest approach is to model your household’s numbers — and the Retirementize calculator makes that modeling fast and straightforward for both married and common-law couples.