It is personal income tax season again. When completing your annual tax returns, be sure to take advantage of all of the tax credits and deductions available to you – don’t leave money on the table. One tax credit that is sometimes overlooked is the pension income tax credit, which is available to eligible taxpayers who are 55 years or older.
With the pension income tax credit, the federal government offers a federal tax credit that amounts to 15 percent of eligible pension income, for up to $2,000 of pension income for the year, for those taxpayers who are currently receiving eligible pension income. In some provinces/territories, a provincial/territorial tax credit may also be available.
For taxpayers who are 65 years of age or older, eligible pension income may include life annuity payments from a pension or superannuation plan, payments from a Registered Retirement Income Fund (RRIF), annuity payments from a Registered Retirement Savings Plan (RRSP) (or deferred profit sharing plan or pooled registered pension plan), regular annuities and periodic payments from a defined contribution pension plan.
Eligible pension income does not include such things as Canada or Quebec Pension Plan (CPP/QPP), Old Age Security (OAS) or Guaranteed Income Supplement (GIS) payments.
If you are under the age of 65, you may still be able to make a claim on life annuity payments from a pension or superannuation plan, or on eligible pension income as a result of the death of a spouse/common-law partner.
Be aware that this is a non-refundable tax credit, which means that you cannot carry the credit forward if it is not used within a particular tax year. However, any unused amounts may be transferred to a spouse or common-law partner.
If you don’t have pension income, one way for individuals who are 65 years of age or older to generate eligible pension income is by opening an RRIF. Other options are available. We can assist you with this option, or help you to explore other options, so please don’t hesitate to let us know.