It is essential for seniors to adopt a plan regarding taxes when planning for retirement. This plan should include using the pension income tax credit, claiming the age amount tax credit, splitting retirement pension income with a spouse, and using the registered retirement income fund.
Are you in the luxurious period of retirement? Have you started planning for it? If not, I’m here to help you plan for retirement and save money. Hi, my name is Allan Madan, your trusted accountant, and in this article I’m going to share some helpful tax tips for people who are retired or planning on retiring.
Use the Pension Income Tax Credit:
When it comes to tax planning for retirees, this tip is ideal for anyone over 55 years of age. If you fall in this bracket you can receive a tax credit of up to $2,000, or your pension income amount, if it’s lower. This can save you $400 or more, per year, in taxes. Pension income includes the following:
- Income from a superannuation or pension fund
- Annuity income out of an RRSP or a deferred profit sharing plan
- Income from a registered retirement income fund
- Income from foreign pensions
Claim the Age Amount Tax Credit:
You can claim this tax credit for seniors if you are 65 years or older at the end of the tax year and if your income is less than $78,000 in the year. In fact, if your income is less than $33,000 in the year you can claim a tax credit of up to $6,700. The absolute best part about this credit is that it is transferable to your spouse.
Split Your Retirement Pension Income With Your Spouse:
An additional tax strategy for old-age pensioners is income splitting. You and your spouse can apply to receive equal shares of your Canada pension plan income that was earned. This is especially beneficial if one spouse is in a higher tax bracket than the other, and can end up saving you a lot in taxes. The only condition is that both partners must be residents of Canada.
Make Use of the Registered Retirement Income Fund:
The registered retirement income fund is an extension of your RRSP. When you turn 71 you have convert your RRSP into a RRIF, or a registered retirement income fund. During retirement, as part of a tax planning approach for retirees, you can use your RRIF to withdraw money and fund your retirement lifestyle. However, once your RRSP has been converted into a RRIF, you can no longer contribute to your RRIF.
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The information provided on this page is intended to provide general information. The information does not take into account your personal situation and is not intended to be used without consultation from accounting and financial professionals. Allan Madan and Madan Chartered Accountant will not be held liable for any problems that arise from the usage of the information provided on this page.