CRA Pension Income Splitting on US IRA distributions?

[LJBill]

A lot of information is telling me [US citizen, Canada PR, 72] that distributions from my US IRA ("regular" or "traditional") is NOT eligible for pension income splitting with my wife [dual citizen, age 61].

In review of our 2023 T1 returns I see that my Canadian-based CPA (a small cross-border company, the Principal is Chartered/Certified in Canada and US) split a large IRA distribution with about 50% going to my wife.

I don't know what to make of this. Presumably he knows the CRA rules much better than I do.

Is he correct on this point?

Thanks!

[LJBill]

ps: I did search the forum for relevant discussions. :- )

[LJBill]

As a public service note: IF pension income splitting is not permitted by CRA on distributions from Regular IRAs, this would seem to add extra weight to doing a super large Roth IRA Conversion BEFORE becoming a Canadian PR. There's been some interesting discussions in forums recently about how over-eager Roth conversions can lead to high IRMAA rates and if the conversions are done for some years in a row then you'll be paying IRMAA for years. Larry Kotlikoff mentioned in a recent blog post to "Go big or go home" with Roth conversions. Meaning to do it once. Big. Yes, tax rate would be high but then you're out of IRMAA (except for 1-2 years) and be in lower tax bracket after that as well. And for Americans moving to Canada, if they drop Medicare then they won't even be subject to IRMAA. And their Roth conversion is sitting in a nice totally tax-exempt Roth...exempt from US and Canadian income tax.

Unfortunately, I didn't have this much foresight myself. I did do a large-ish Roth conversion the year before I immigrated, more by chance than by planning. I could have done 5-6 years of Roth conversions when I had NO income after retiring (I delayed my SS until 70); man, that woulda set us up nicely. But the move wasn't in the scope at that time.

But for anyone contemplating moving from the US to Canada, give this some thought before landing.

[nelsona]

No. The CRA is quite clear that IRA income is NOT splitable.
https://www.canada.ca/en/revenue-agency ... ncome.html

Your accountant is simply wrong.


As to your comments about Roth conversions while at or nearing the age to take Social Security, yes IRMAA (the mechanism by which one has their Medicare premiums increased due to income having been taken in the 1-2 years prior to 65), does come into play.

Roth conversion should NOT be done once living in Canada, of course, but doing so in ones early retirement years, or, as you say, ONCE in mid-60s before returning to Canada, is a good idea.

[LJBill]

Thank you nelsona.

That is pretty clear at CRA, no doubt about it.

I wonder how my CPA got this wrong?

Roths: Yes, I should have mentioned the important point to send in that letter to the CRA regarding the "election". This is currently described at CRA in Income Tax Folio S5-F3-C1 (https://www.canada.ca/en/revenue-agency ... h-ira.html, scroll to Procedures for the election).

This was not yet Official at the time that I landed in Canada. Fortunately I was aware of a blog post from Royal Bank and followed it (https://ca.rbcwealthmanagement.com/docu ... th+IRA.pdf)

[nelsona]

Your CPA got it wrong because he is unaware of cross-border rules. He is merely a CPA.

[nelsona]

The regulation for reporting Roths was released in September 2010, and was well-publicized here, long before you returned.

[MaggieA]

In case this is helpful, you can at least split 85% of your Social Security.

[LJBill]

MaggieA wrote:
> In case this is helpful, you can at least split 85% of your Social
> Security.

Yes, that's helpful, thank you. I am aware of this. It's a bit "tricky" that some pensions may be split, others not so. I notice the CRA makes distinctions of "pension income" and "retirement income".