If you have reported eligible pension, superannuation (pension you received upon retirement.), or annuity payments on your T1 income tax return, you may be able to claim the pension income amount of up to $2,000. Check this TurboTax link for different types of senior income.
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 an RRIF transferred to an RRSP, another RRIF, or annuity
- amounts are 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 Line 31400, Pension income amount using a worksheet. Then you will enter the amount on line A or $2,000, whichever is less, on line 31400 of your T1 return.
A common rule: if you are eligible to split the pension, you will be able to claim the pension amount. Usually, if you are receiving your pension in annuity payments (periodic payments), you will be able to split the income with your spouse/common-law partner when filing your tax return except for the Retirement Compensation Arrangement (RCA) received in a T4A-RCA slip. If you are 65 of age or older and have received a lump-sum payment from the RCA, you will be able to split the pension but you will not be eligible for the pension amount. However, if you are under 65 years old, you will not be able to either split this income or be eligible to apply for the pension amount for it.
You may also find the Canada Revenue Agency‘s online Q&A for determining which pension or annuity income qualifies useful.
Excess Pension Amount
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. However, if you have a spouse or common-law partner, you can transfer the unused portion of the pension amount to them by using schedule 2.
TurboTax software offers an easy step-by-step guide to claim your pension income, calculates the pension amount and the split pension amount, and fills schedule 2 automatically for you and your partner. Consider TurboTax Live Assist & Review if you need further guidance, and get unlimited help and advice as you do your taxes, plus a final review before you file. Or, choose TurboTax Live Full Service* and have one of our tax experts do your return from start to finish.
*TurboTax Live™ Full Service is not available in Quebec.