5 tax tips for seniors and retirees
Tax and Estate Planning Advocate Doug Carroll explains where you can find tax efficiencies in your later years.
There are a few tax advantages to getting older. We’ve provided a few tips on ways you could lower your tax burden.
1. Pension income splitting
You may split up to half of your annual income from a registered pension plan (RPP) or registered retirement income fund (RRIF) with a lower-income spouse or common-law partner. For RRIFs, you normally have to be age 65 or older, but for RPPs, pension income splitting applies at any age. Learn more on the Government of Canada website.
2. Pension credit
You can lower your tax bill by $300 if you’re able to claim a federal tax credit on up to $2,000 of eligible pension income from a registered annuity, RPP or RRIF. Another $100 of tax savings is available through your provincial pension credit. If you have used pension-splitting (see above) with your spouse/common-law partner, they may also be able to claim the pension credit on those amounts.
3. Age 65 credit
If you are age 65 or older at the end of 2022, the federal age credit is $7,898, which can reduce your taxes. However, the credit is subject to a clawback depending on your income. Each province has its own age credit (and clawback) as well, though none are as lucrative as the federal one.
4. Home accessibility credit
For someone 65 or older who is eligible for the disability tax credit, this credit is worth as much as $1,500 based on spending up to $10,000 annually to make a dwelling more accessible. It may be claimed by that person or possibly by an eligible caregiver.
5. Medical expense credit
This credit is open to everyone, but as we age, we may have more frequent and larger medical costs. It can be based on any 12-month period ending in the tax year, so examine when costs were incurred to decide how best to make your claim. It applies once expenses exceed the lesser of $2,479 or 3% of net income.
Learn more about taxes when you retire or turn 65 years old at the Government of Canada website.
The information contained in this article was obtained from sources believed to be reliable; however, we cannot guarantee that it is accurate or complete. The material is for informational and educational purposes and is not intended to provide specific advice including, without limitation, investment, financial, tax or similar matters.