The Pension Income Tax Credit

Himani Ediriweera

After spending a lifetime saving for your retirement, it’s critical you know all the credits you can claim to keep that money in your pocket. If you reported eligible pension, superannuation or annuity payments, you might qualify for a little tax break.

The non-refundable Pension Income tax credit will help you reduce, or eliminate, a balance owing on your income tax. This credit is available to individuals 55 years or older and allows you to deduct, from your payable taxes, up to $2,000. Unused portions cannot be carried forward so if you are not using the full credit, you can transfer up to 50% to a spouse or common-in-law partner. 

Taxpayers in Quebec under the age of 65 are no longer eligible to split pension income with a spouse.

What is eligible pension income?

To qualify for the Pension Income tax credit, you must have eligible income.

For taxpayers 65 years and older, Pension Income includes:

  • Superannuation or pension fund
  • Foreign pensions
  • A Registered Retirement Income Fund (RRIF).
  • Annuity payments from a Registered Retirement Savings Plan (RRSP) or a Deferred Profit Sharing Plan (DPSP)

For taxpayers 65 years or less, Pension Income includes:

  • Lifetime retirement benefits
  • Annuity income from an RRSP, RRIF or a DPSP received from the death of a spouse 

What is not eligible pension income?

Income that does not qualify as Pension Income includes:

  • Foreign pension that is tax-free in Canada
  • Old Age Security
  • Canada Pension Plan and Quebec Pension Plan
  • RRSP withdrawals other than annuity payments
  • Investment income from market-based investments

Always remember to claim the corresponding tax credit amounts on your provincial or territorial worksheet. Tax credits aim to help reduce your amount owing — and the Pension Income Amount will help you save.