Seniors, Tax Tips & Advice

Can You Claim the Pension Income Amount?

0 Comments 08 January 2013

If you have reported eligible pension, superannuation*, or annuity payments on your T1 income tax return, you may be able to claim the pension income amount of up to $2,000.

Whatever province or territory you live in, being able to claim this tax credit will save you hundreds of dollars in taxes due when you do your income tax. But not all pension income qualifies. Here are the rules for the types of pension income that do and don’t:

What Qualifies as Eligible Pension Income

If you are 65 or older:

  • Income from a superannuation or pension plan
  • Registered Retirement Plan (RPP) lifetime benefits
  • Registered Retirement Income Fund (RRIF) income
  • Deferred Profit Sharing Plan (DPSP) income
  • Registered Retirement Plan (RRSP) income
  • Employee Benefit Plan (EBP) benefits
  • Regular annuities
  • Elected split pension income
  • Variable pension benefits
  • Foreign pension income unless the foreign pension income is tax-free in Canada because of a tax treaty or income from a United States individual retirement account

Part of what qualifies as eligible pension income is determined by your age.

If you are 55 to 64, the only eligible pension income you will have is from a superannuation or pension plan or annuity income you are receiving because of the death of your spouse or common-law partner. The income you receive in such a case might be in the form of RRIF income, RRSP income, or DPSP income, for instance, but only such income that is the result of the death of your spouse  will qualify.

What Doesn’t Qualify as Eligible Pension Income

  • Old Age Security (OAS) benefits
  • Canada Pension Plan (CPP) benefits
  • Quebec Pension Plan (QPP) benefits
  • Death benefits
  • Retiring allowances
  • Excess amounts from a RRIF transferred to an RRSP, another RRIF or annuity
  • amounts shown in boxes 18, 20, 22, 26, 28, and 34 of your T4RSP slips
  • amounts distributed from a retirement compensation arrangement shown on your T4A-RCA slip

Calculating the Pension Income Amount

To calculate how much of the pension income amount you can claim, you will fill out the Line 314, Pension income amount on the Federal Worksheet (part of your T1 income tax package). Then you will enter the amount on line A or $2,000, whichever is less, on line 314 of your T1 return.

TurboTax Home and Business makes figuring out whether or not you qualify for the pension income amount easy; just enter the relevant amounts  shown on your T4A, T4RSP, or foreign income slips in the T-Slip entry screens and TurboTax will calculate your pension income account and transfer it to the proper line on your T1 income tax return (line 314).

You may also find the Canada Revenue Agency‘s online Q&A for determining which pension or annuity income qualifies useful.

Note that the Pension Income Amount is a “use it or lose it” tax credit. It can’t be carried over from year to year!

*Superannuation payments are payments that you receive from a pension you received upon retirement.

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