Income Tax Information for Seniors

CPP General

• Between the ages of 60 and 70, you can apply for CPP
• To receive CPP before age 65, your annual employment or self-employment earnings must be less than the maximum annual pension payable at age 65
• The amount of CPP will depend on how much and how many years you have contributed to the plan

How much is CPP

• Current maximum CPP is $775 per month
• If you apply for CPP pension at age 60, your CPP benefit will be reduced by 6% per year before your 65 th birthday
• If you defer your CPP application until after age 65, your payment will increase by 6% per year

CPP Application

• You have to apply for CPP benefits
• You may direct up to 50% of CPP to be paid to your spouse as an income splitting strategy if both of you over age 60

OAS: Old Age Security benefit

• Maximum OAS at age 65 $433/month
• Maximum OAS - You must have lived in Canada for 40 years or more after turning 18
• Partial OAS - You must have lived in Canada for 10 years after turning 18

OAS

• OAS payments are completely clawbacked if net income exceeds about 90,000
• OAS benefit reduced when net income is over $55,000
• File your application for OAS at least 6 months before your 65 th birthday
• Maximum retroactive approval for one year

Age Credit

• If you are 65 or older, you get additional personal credit of $3,619 if your income is below $26,941
• No age credit when your income exceeds 51,000

Spousal Amount

• If you support your spouse or common- law partner and your spouse income is less than $630, you can claim a spousal amount of $6,293
• If your spousal income exceeds $6,293, no spousal amount available

Pension Income Credit $1,000

• Pension income does not include CPP, OAS or guaranteed income
• It basically means private pension income received through a life annuity
• If you are age 65 and over or are receiving payments as a result of your spouse's death, it also includes annuities out of an RRSP, DPSP, RRIF
• Therefore aim for at least $1,000 of qualifying pension income annually

RRSP

• You must wind up your RRSP in the year when you turn 69
• You may still contribute to your spousal RRSP if your spouse is under 70 and you have RRSP contribution room

RRSP Maturity option #1 - With draw the funds

• You can simply withdraw the final and include the lump sum in your income
• The withholding tax on RRSP:
  • Under $5,000 - 10%
  • $5,000 to $15,000 - 20%
  • $15,000 and Over - 30%

RRSP Maturity option #2 - Purchase an annuity

• None of the RRSP proceeds will be taxed immediately, but the annuity payments will be taxed as you receive them (Currently $1,000 per year income from annuity may be effectively exempted if you are about age 65)
• "Term-certain" - Payable to you or your estate for a fixed number of years
• "Single life" - Payable to you as long as you live
• "Joint & last survivor life" - Payable as long as you or your spouse is alive

RRSP Maturity option #3 - Convert RRSP to RRIF

• Similar to RRSP, you can invest in various kinds of securities
• Minimum amount of withdrawal =
  value of RRIF x (1 / (90 - your age))

RRSP Maturity option #4 - LIF (Life Income Fund)

• Transfer from registered pension plan
• Similar to RRIF, there is a minimum and maximum withdrawal

Estate Planning

• Importance of a will
• Probate fee:
  • First $25,000 - $ 0
  • $25,000 to $50,000 - $ 150
  • $50,000 and over - 1.4%

How to minimize probate fees

• Properly held as "Joint tenants" with right of survivorship
• Keep assets out of the estate e.g., life insurance with designated beneficiaries

Medical Expenses

• You have to deduct 3% of your net income, to a maximum of $1,678
  • eg. Net income $40,000
  • Medical expenses $2,000
  • 3% net income $1,200
  • Medical expenses allowed is $800
• Combine your family's medical expenses on one return
• Plan for the timing of medical expenses - you can pick any 12 month period ending in the year