If you or your spouse or common-law partner earns significantly more than the other, you can allocate up to 50 per cent of eligible pension income to the lower-earner.Illustration by The globe and Mail. Source images: Getty Images
Retirement isn’t just a big milestone in your personal and professional life – it’s also a major shift in your tax situation. With tax season in full swing, The Globe and Mail has gathered expert tips to help retirees make the most of their tax returns this year.
Split your pension
If you or your spouse or common-law partner earns significantly more than the other, you can allocate up to 50 per cent of eligible pension income to the lower-earner. This can lower your overall tax bill, says Prashant Patel, vice-president of high net worth planning services at RBC Wealth Management. Eligible pension income includes payments from a registered retirement income fund, an annuity, and other pension payments.
For example, seniors with earnings of more than $90,997 in 2024 must pay the Old Age Security recovery tax, known widely as the OAS clawback. For every taxable dollar made over that amount, your pension will be reduced by 15 cents. If you earned $100,000 and your partner earned $60,000, transferring $20,000 of your pension income could bring both your incomes down to $80,000, helping you avoid the clawback.
If you don’t have a spouse or a partner, you don’t have the same tax-splitting options. However, you can still use benefits through credits and deductions, such as the disability tax credit and home accessibility tax credit.
Share your pension
Sharing your Canada Pension Plan benefits works similarly to pension splitting, says Faisal Karmali, senior wealth adviser at the Popowich Karmali Advisory Group. If you and your spouse or common-law partner receive different CPP amounts, you can apply to share your benefits. The Canada Revenue Agency determines the amount based on how long you lived together during your working years.
Age amount credit
If you were 65 or older at the end of 2024 and your net income is less than $102,925, you may qualify for the age amount tax credit, said Chad Brown, an Edmonton-based tax lawyer. For incomes of $44,325 or less, the maximum credit is $8,790.
You can also transfer any unused portion of this credit to your spouse. For example, if you only need $4,000 of your credit to reduce your tax bill, the remaining amount can be applied to your partner’s taxes.
Pension income amount credit
If you’re 65 or older and receive eligible pension income, you may qualify for a tax credit on $2,000 of that income – translating into up to $300 in federal tax savings. If you don’t currently receive a pension, consider converting enough registered retirement savings plan (RRSP) assets into a registered retirement income fund (RRIF) to withdraw at least $2,000 a year and qualify for this credit.
Claim medical and disability expenses
You can claim medical expenses that exceed either 3 per cent of your net income or $2,759 – whichever is lower. Keep receipts for all medical-related purchases to maximize your claim.
If you or a dependent who is 18 years or older have a disability, you may also qualify for the disability tax credit for up to $9,872 for 2024.
Additionally, seniors can claim the home accessibility tax credit for renovations that improve mobility and safety, such as installing handrails or a walk-in bathtub. If you qualify, you can claim up to $20,000 in eligible expenses.
If you’re renovating to create a separate living space for a senior or an adult with a disability, you may also qualify for the multigenerational home renovation tax credit, which covers up to $7,500 in eligible expenses.
Turning an RRSP into an RRIF
After turning 71, Canadians must decide what to do with their RRSP. Simply withdrawing money from an RRSP can lead to high taxation. To avoid this, many Canadians convert their RRSP to an RRIF.
You have to make mandatory minimum withdrawals from an RRIF every year, whether you need the income or not. Since an RRIF is considered pension income, you can split up to 50 per cent with your partner.
Foreign pension income
If you receive a pension income from abroad, check if there is a tax treaty between Canada and the foreign country that provides for an exemption or reduced tax rate, says Daniel Dwyer, a tax partner with KPMG Canada. You can also claim a foreign tax credit for any taxes paid abroad.
Prepare for next year
Once you have gotten through your taxes for this year, you should already be planning for next year, said Mr. Karmali.
Mr. Karmali said the biggest mistake he sees is Canadians doing their tax planning too close to tax season. “Tax planning starts January 1st of the calendar year,” he said, meaning tax planning for 2025 should have started in January.
“Use this tax season as a measuring stick for future planning, knowing what errors you might have made already in the calendar year of 2024, so that you don’t make those same kind of errors in 2025 and beyond.”
Editor’s note: This article has been updated to specify that the pension-splitting strategies outlined may be used only if the lower-income spouse or partner is 65 or older, and that eligible pension income includes payments from an annuity, not directly from a registered retirement savings plan.
(April 1, 2025) This article was further updated to remove the reference to age guidelines for pension income-splitting, as some strategies require the transferring partner to be 65 or older, and some do not.
What do you want to know about filing your taxes?
On Tuesday, April 1 at 1 p.m. ET, Globe Advisor reporter Rudy Mezzetta and personal finance reporters Erica Alini and Salmaan Farooqui will answer your questions about the 2025 tax filing season.
Maybe you’re uncertain how to handle the changes made to the capital gains tax. Perhaps you could use a refresher on what childcare costs can be included in your tax returns. Or maybe you want to know what benefits you can claim as a retiree. Fill out the form below.
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