Personal Tax Tip – Tax Credits for Retirees
Tax Credits for Those Over 65
If you were 65 years of age or older on December 31, 2015, then you might be eligible for some tax breaks.
You might be eligible to claim a tax credit for being 65 years of age or older, depending on your income level. The maximum age credit is reduced once net income for the 2015 tax year exceeds $35,466 for federal tax purposes and $33,174 for BC tax purposes, and declines to zero when net income exceeds $82,353 for federal tax purposes and $62,887 for BC tax purposes. In 2015, the maximum combined Federal and British Columbia age tax credit can reduce your taxes payable by as much as $1,280.
You might also be eligible to claim the pension income tax credit, calculated on the lesser of $2,000 and the eligible pension income you included in income for the year. The combined Federal and British Columbia tax credit can reduce your taxes payable by as much as $351.Eligible pension income includes annuities (not a lump sum) you receive from superannuation or registered pension plans, RRSP annuities, or payments from a registered retirement income fund (RRIF) and annuity payments out of a deferred profit sharing plan (DPS). Old Age Security and Canada Pension Plan income do not qualify for the pension credit, although US Social Security will qualify to the extent that it is taxed in Canada. The pension credit is also available to individuals under 65 years of age on life annuity payments from superannuation or pension plans and on certain annuity payments arising by virtue of the death of a spouse.
If you are 65 or older and your only source of pension income is from Old Age Security and Canada Pension Plan payments, but you have an RRSP, you may qualify for the Pension Income Credit by transferring a sufficient amount of RRSP funds into a RRIF or annuity to create qualifying pension income.
If you are under 65 years of age and receiving income from a pension plan, or income from RRSP annuities, RRIFs, and certain other annuities as a result of the death of your spouse, you may also qualify for the credit.
You might also be able to file an election to split up to 50 per cent of your eligible pension income with a spouse or common-law partner. If you were 65 or older during 2015, consult our knowledgeable Chartered Professional Accountants to see what tax breaks you might be eligible for.
For more really useful tax tips, visit https://www.bccpa.ca/CpaBc/media/CPABC/News_Events_Publications/Publications/TaxTipsandRRSP/Tax-Tips-2015.pdf .