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Ten Tax-Saving Tips for Retirement in Canada

how to save tax in canada

Dummies Series in Companion Content for the E-Book Pay Less Tax In A Day For Canadians For Dummies

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Retiring has many benefits — sleeping in, travelling without worrying how many e-mails have piled up in your inbox, and tax savings. What? That’s correct; you can save money on your taxes while you’re retired! Read on for ten thrifty strategies to help you enjoy your golden years in comfort.

Reap the benefits of the Old Age Security (OAS) program

Currently, the Old Age Security (OAS), a monthly pension payment, is available to most Canadians age 65 or over. However, proposals announced in 2012 will increase the age eligibility from 65 to 67 between the years of 2023 and 2029. For those born in 1958 or later their eligibility for OAS will be deferred past their 65th birthday.

The OAS is paid to both individuals that are resident in Canada and those that no longer live in Canada. The amount is adjusted quarterly for increases in the cost of living as measured by the Consumer Price Index. The maximum monthly OAS pension payment for July to September 2012 was $544.98.

Eligibility for an OAS pension is based on two criteria: age and years resided in Canada. Two categories of people are eligible for OAS:

People living in Canada who are 65 or older, are Canadian citizens or legal residents, and have lived in Canada for at least 10 years while adults, and

People living outside Canada who are 65 or older, were Canadian citizens or legal residents at the time they ceased to live in Canada, and had lived in Canada for at least 20 years as an adult.

Don’t fall into either of these categories? You still may be eligible to receive OAS! Canada has a number of social security agreements with other countries. If you lived in one of these countries or contributed to its social security system, you may qualify for a pension from that country, Canada, or both.

A full OAS pension will be paid where you lived in Canada at least 40 years while an adult. Even if you do not meet this test, you may meet other criteria that will allow you a full OAS pension. Where a full OAS is not available, a partial OAS can be paid to you if you have been in Canada at least 10 years as an adult. If you were in Canada for 10 years your partial OAS pension would be 10/40ths of a full OAS pension.

To ensure your OAS payments start on time, apply six months before your 65th birthday. Apply using form ISP 3000, “Application for the Old Age Security Pension,” available on Service Canada’s website


Need help to determine whether you are eligible for OAS? Of whether you are entitled to a full or partial OAS pension? Contact Service Canada at 1-800-277-9914 or drop in to a Service Canada Centre.

Your OAS pension is taxable, and reporting the tax on your return is very simple. You’ll receive a T4A(OAS) information slip summarizing the amount paid. Include the amount noted in box 18 on line 113 of your tax return. Some tax may have been withheld on the OAS pension payment to you; this amount will be noted in box 22 of the T4A(OAS). Be sure to include the withheld tax on line 437 of your return.

Don’t forget to apply for other OAS payments

In addition to a regular OAS pension, an individual may be entitled to additional payments under the OAS program. None of the following payments are taxable but they must be reported on your tax return. The amount paid to you is noted in box 21 of the T4A(OAS) slip. The amount is to be reported as income on line 146 of your return and then deducted on line 250. To receive these special non-taxable OAS payments you apply using form ISP3026:

Guaranteed income supplement: The guaranteed income supplement (GIS) provides low-income seniors in Canada with supplementary pension payments in addition to the regular OAS pension. The GIS is based on the combined income of you and your spouse or common-law partner, if you have one.

The allowance: The allowance is an additional amount paid to low-income seniors aged 60 to 64 with a spouse or common-law partner who receives the OAS and GIS. It’s like an early OAS pension. To receive it, you must meet some residency requirements.

The allowance for the survivor: Additional money is paid to low-income seniors aged 60 to 64 if their spouse or common-law partner has died and they meet residency requirements.

To continue receiving the GIS, the allowance, or the survivor’s allowance, ensure you file a tax return each year. Without a tax return on file, your payments will stop!

Know your CPP/QPP benefits

After the OAS, the CPP (and its Quebec counterpart, the QPP) is a second level of public pension available to certain Canadians. However, unlike the OAS pension, which is available to those who meet certain residency requirements, you receive a CPP/QPP pension only when you’ve paid into the plan. If you earned employment or self-employment income during your working days, you most likely paid into one (or both) of these plans and will reap some benefits in your retirement years.

Table 1 lists the variety of benefits you can receive under the CPP/QPP and notes whether they’re taxable.

Summary of CPP/QPP Benefits and Taxation

Category: Taxes

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