Unlock $2000 Monthly: Are You Eligible for Canada’s Pension Income? Find Out Now!

Unlock $2000 Monthly: Are You Eligible for Canada’s Pension Income? Find Out Now!

If you reported qualified pension, superannuation, or annuity payments on your return, you might be eligible to claim up to CAD 2,000 of your federal pension income amount. This non-refundable tax credit allows you to lower your tax liability. Note that the Pension Income Amount is not available for benefits like Old Age Security (OAS) or the Canada Pension Plan (CPP).

Even though there are not many tax benefits from the credit, being qualified for it affects some tax-saving options, such as pension income splitting. As more couples choose this technique, their tax planning centers around the amount of pension income. So, check this page for information on the Pension Income Amount, what it is, and who is eligible for the CAD 2000 Pension Income Amount.

Canada Pension Income Amount

There are several tax credits available in Canada once you turn 65, which generally help reduce the income tax owed by seniors and can be particularly beneficial in lowering retirement-related taxes. One such credit is the Pension Income Tax Credit, which you can apply for if you are 55 years of age or older. This credit allows you to deduct a tax credit equivalent to the lesser of CAD 2,000 or your pension income from the taxes you owe.

Depending on the province in which you reside, this translates into annual real tax savings of CAD 440 to CAD 720. However, the Pension Income Tax Credit cannot be carried over annually and is non-refundable. The highest federal tax savings attainable is CAD 300 per year, given the federal tax credit rate of 15%. Additionally, there are varying pension income levels for each province. Only if you are in the lowest tax bracket will you be able to claim the first CAD 2,000 of your pension income tax-free.

Who is Eligible for CAD 2000 Pension Income Amount

For taxpayers who are 65 or more:

• Income from a pension or SP
• Benefits of a Registered Retirement Plan (RPP) for life
• Income from a Registered Retirement Income Fund (RRIF)
• Income from the Deferred Profit Sharing Plan (DPSP)
• Income from a Registered Retirement Plan (RRSP)
• Benefits of the Employee Benefit Plan (EBP)
• Regular annuities and ESPI
• Pension benefits that change
• Foreign pension income, unless it comes from a United States individual retirement account or is tax-free in Canada due to a tax treaty

For taxpayers who are less than 65:

• Payments from a superannuation or pension plan for life annuities
  payments received as a consequence of the death of a spouse or common-law partner
• since tax year 2010 annuity payments from the Saskatchewan Pension Plan (SPP) or payments from an RRIF, or annuity payments from an RRSP or from a DPSP

PIA: Eligible Pension and Annuity Income?

How to Calculate Pension Income Amount

To determine how much of the pension income amount you may claim, you will use a worksheet to fill out Line 31400, Pension Income Amount. You will then enter the amount from line A of the worksheet or CAD 2,000, whichever is smaller, on line 31400 of your T1 return. If you are eligible to share your pension income, you will be entitled to the Pension Income Amount.

Except for the Retirement Compensation Arrangement (RCA), which is issued in the form of a T4A-RCA slip, you can often share your pension income with your spouse or common-law partner when completing your tax return if you receive annuity payments (periodic payments).

How much can you claim?

• There is a 15% federal tax credit rate.
• The most that may be saved on federal taxes is CAD 300. This is predicated on the capped rate of CRA 2,000 × 15%.
  Additionally, there are pension income levels for provinces.
• Lower tax bracket: If a client is in the lowest tax bracket, they are eligible to claim and receive the first CAD 2,000 of their pension income tax-free.
• Higher tax bracket: They will pay a lower rate of tax on their pension income if they are in a higher tax bracket.