Income splitting for pensioners is an excellent means of lowering total family tax. It works when there are two people of different income levels. Pension income that may be split comprises employment pension and RRIF, but not OAS or CPP.  A key benefit is that the higher-income spouse whose pension income is split now pays tax at a lower marginal tax rate. Another benefit is that the overall family tax payable is reduced.

There are some challenges. The lower-income spouse technically has to pay more tax in the individual sense, so a family plan to pay any outstanding taxes should be made. Keep in mind that the lower income spouse may be surprised at the sudden tax bill, so the plan to pay and the overall family tax savings must be kept foremost in mind.