Mr. and Mrs. Lee are both 67 years old. Mr. Lee has $60,000 in eligible pension income from his former employer. Mrs. Lee has no pension income. They are both in a 30% marginal tax bracket. What is the approximate maximum tax savings from pension income splitting?

Question: Mr. and Mrs. Lee are both 67 years old. Mr. Lee has $60,000 in eligible pension income from his former employer. Mrs. Lee has no pension income. They are both in a 30% marginal tax bracket. What is the approximate maximum tax savings from pension income splitting?

Answer options:

• $0
• $3,000 ✅ $6,000
• $9,000

Correct answer: $6,000

Explanation: Mr. Lee can split up to 50% of his pension income, which is $60,000 * 0.50 = $30,000. Assuming Mrs. Lee is also in the 30% bracket (or a lower bracket if there's a difference, but typically the benefit is when moving income to a lower bracket), or if both are in the same bracket and splitting reduces their overall tax burden by filling up Mrs. Lee's lower tax brackets, the maximum tax saving is $30,000 * (30% - 10%) = $6,000 if Mrs. Lee is effectively in a 10% lower bracket, to maximize this. Or more simply if both are in the same marginal bracket, there isn't a federal tax saving, but provincial tax differences or using Mrs. Lee's personal amount could create savings. However, in the context of typical CFP questions, if no specific bracket change is given, general tax savings from spreading amounts across two personal amounts is implied, or if one spouse is in a much higher bracket.