Have you turned 65? If so, you might want to look into some of the changes concerning your income tax and benefits announced by the CRA last week.
65 is the official retirement age in Canada. Since the day you turn 65, you will be eligible for many cash benefits such as a pension, or retirement savings. In addition, you can claim payments from the government-funded Old Age Security (OAS) and withdraw from your Registered Retirement Savings Plan (RRSP). That said, you can choose to continue working until the age of 70, thereby delaying payouts to maximize their amounts. Once you begin to receive pension payouts, you can no longer contribute to the Canada Pension Plan (CPP) even if you still receive active income. The CRA, however, has made a few changes to your tax benefits that can’t be postponed. Here are the changes you need to know:
- Age amount tax credit
This is an addition to your basic personal amount credit (BPA). For the 2020 tax year, you can reduce your income tax by $1,984 with the BPA credit and an additional $1,146 with the age amount credit. That said, if your net income in 2020 is below $89,421 or exceeds $38.508, you cannot avail of the tax credit.
2. Canada Training credit
The CRA started to dole out $250 refundable credit for Canadian residents who decide to take up more professional training. However, the credit is only available for people aged between 26 and 65. It is designed to encourage people at working age to enhance their professional skills and earning ability, not for those who have passed the retirement age.
To reduce the tax on your post-retirement income, you can invest the amounts in your Tax-free Savings Account. For more financial advice, call us at (416) 551-5550