Tip of the Week

Pension Income Deduction

You may be entitled to claim a tax credit of up to $2,000 on your pension or annuity income for the year on your personal tax return.  This credit is located on line 31400 of your tax return.  The credit is calculated in the following manner:

+ Pension or annuity income reported on line 11500, 11600 or 12900

- Less any foreign pension income or U.S. retirement income

= Credit allowed on line 31400 up to a maxiumum of $2,000

It should be noted that income from sources such as Old Age Security, Canada Pension Plan, death benefits and retiring allowances are not considered pension income in this calculation.

You may also be able to transfer all or a portion of your pension income deduction to your spouse in order to use all or part of their pension income deduction.

In cases where only one spouse has pension income or where one spouse has less than $2,000 of pension income, you may be able to jointly elect to split pension, annuity, RRIF and RRSP annuity payments you reported on line 11500 and/or line 12900.  To do this, both you and your spouse must make a joint election on Form T1032, Joint Election to Split Pension Income.  By filing this election, both spouses can qualify for up to $2,000 of tax credits, even if one spouse does not have sufficient pension income to make the claim.

Questions?  Call or email today!