If you optimize pension splitting does it account for OAS clawback the next year? i have a client that hasn't started collecting OAS yes, but will in 2022. Income with pension from her spouse is $90,286. That would mean a clawback of $1,500 (i think) but the T1032 opt is only showing a savings of $450. is pension splitting worth it?
The optimizing calculation only takes into consideration the current year taxes, which includes the current year repayment of OAS, but not the following year's clawback. If you are sure that she will have the clawback next year with the pension splitting but not without the pension splitting, it might not be worth it for that amount of savings. I also consider the effect on a taxpayer's requirement to make instalment payments when determining if the pension split is worthwhile.
Thanks for the prompt reply. What i am still fuzzy on is that i am concerned that she will get less OAS starting in 2022 based on the income in 2021. with pension splitting then will be saved on the 2021 tax return. The benefit of pension splitting in 2021 tax return is $447. The total income is in 2021 is 90,775 when pension income is added. if i have the calculators right she will be clawed back $1,500 making the 447 not worth it. your reply is greatly appreciated, thank you Am i on the right track, meaning pension splitting is not worth it?
What will her income be without the pension splitting, and when does OAS start in 2022? Also, keep in mind that if she gets less OAS in 2022, it is not just "gone", it is withheld as taxes and then if her income in 2022 is lower she basically gets it back. If her income in 2022 is high again, she will have to repay any OAS she receives anyway.
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