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From UFile's tax expert Gerry Vittoratos.

Seniors, taxes and more – Everything you need to know

Jan 28, 2022 by System
The Income Tax Act (ITA) is filled with provisions that allow seniors to save on their taxes. Beyond that, however, there are other measures designed to help seniors with their finances. This article summarizes some of these measures and explains how to optimize certain specific benefits.

 

UFile Blog - Seniors and taxes

Income tax measures

The following are income tax measures that are targeted towards seniors.

Pension income splitting: A pensioner who has a spouse and has received eligible pension income (RRSP, RRIF, RPP) can split up to 50% of that income with their spouse.

Pension income amount: You can claim a non-refundable tax credit of up to $2,000 if you received eligible pension income.

Age amount: If you are 65 or over at the end of the year and you earned less than $90,000, you are eligible for this non-refundable tax credit.

Canada caregiver credit: If you support a spouse who has an impairment, you can claim this credit to supplement the existing spousal amount.

Disability tax credit: If a medical practitioner certifies that you are disabled, you can claim this substantial non-refundable tax credit.

Expert tip: If the medical practitioner certifies that your disability was present for several years prior to the year of your application, you can claim the disability tax credit for each of those years by requesting an adjustment of your tax returns up to 10 years back from the current year.

Home accessibility tax credit: You may be eligible for this non-refundable tax credit if you made renovations to your home in order to make it more accessible. The minimum requirement is to be at least 65 years old at the end of the year.

Benefits

Benefits specifically targeted towards seniors are pension benefits such as Old Age Security (OAS) and the related Guaranteed Income Supplement (GIS). OAS is a monthly pension that you start collecting when you reach age 65. The GIS is paid to low-income earners in addition to the OAS and it is tax-free.

Expert tip: Ordinarily, you have to be 65 or older to collect the GIS; however, if you are widowed and between the ages of 60 and 64, you can apply for the Allowance for the Survivor. This is done through the My Service Canada Account portal, and the eligibility criteria and benefit amounts are the same as for the GIS. 

Considerations for working seniors

Here are some advanced tips for working seniors:

If you decide to continue working past the age of 65, you can delay the payment of your OAS pension. There are two potential benefits to this option:  

  • you will receive a higher amount for each month that your first payment is delayed;
  • you can avoid the OAS pension recovery tax (or “clawback”) on your tax return. If you earn more than the minimum income threshold ($79,845 for 2021), the federal government will charge you an additional tax of 15% for every dollar above the threshold.

You can also make an over-contribution to your RRSP in the year that you turn 71, then make one final RRSP deduction on your tax return beyond the allowable age of 71. Here’s how that works:

  • you make a large lump-sum contribution in the amount computed above in December of the year you turn 71; you will be subject to the over-contribution tax of 1% of the excess contribution for one month (1% of the excess amount), but the tax deduction will far outweigh this tax;
  • you deduct this contribution on your tax return.*

*Since you had “earned income” in the year, you increased your RRSP deduction limit by 18% of that income for the following year and you can deduct the RRSP contribution from December.

Want to learn more? Connect with us on Facebook and Twitter for news and updates on tax return and UFile online tax software. Visit Let's Talk Tax to get accurate answers to all your questions about your tax return.

Presented by UFile's tax expert
Gerry Vittoratos
MTax

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