What Is Eligible Pension Income?

by Dean Paley on February 6, 2010

If you receive certain pension income, you may be able to claim the $2,000 pension income tax credit (also known as the pension amount) as well as split this pension income with your spouse or common law partner. But what pension income qualifies?

If You Age 65 Or Older

If you are over the age of 65, the following qualifies as pension income:

  • Income from a superannuation registered pension plan
  • Annuity payments from an RRSP
  • Payments from a RRIF, LRIF, or LIF
  • Annuity payments from a Deferred Profit Sharing Plan (DPSP)
  • Regular annuities reported on box 24 of your T4A
  • Income averaging contacts (IIAC) reported on box 19 of your T5

Certain foreign pensions also qualifiy as pension income if reported on line 115 of your tax return except:

  • The foreign pension deducted at line 256 because it is exempt under an income tax treaty.
  • Income from a U.S. Individual Retirement Account (IRA)
  • Excess amounts from a RRIF that are included on line 115 and transferred to an RRSP, another RRIF, or annuity

If You Are Under Age 65

If you are under age 65 qualified pension income is limited to:

  • Registered pension plan payments, or

The following, but only if received as a result of the death of a spouse or common law partner:

  • Annuity payments from an RRSP
  • Payments from a RRIF, LRIF, or LIF
  • Annuity payments from a Deferred Profit Sharing Plan (DPSP)
  • Regular annuities reported on box 24 of your T4A
  • Income averaging contacts (IIAC) reported on box 19 of your T5
  • Foreign pension income mentioned above

What Income Does Not Qualify?

  • Old Age Security (OAS)
  • Canada Pension Plan (CPP)
  • Quebec Pension Plan (QPP)
  • Saskatchewan Pension Plan (SPP)
  • Amounts received under a retirement compensation arrangement (RCA)
  • Variable pension benefits paid from a money purchase provision of a RPP are not considered life annuity payments and do not qualify you are over age 65 at the end of the year or the variable benefits are received as a result of the death of a spouse or common-law partner.

Looking For Professional Help?

There are a number of income splitting techniques that can be employed by business owners and seniors.

Call us at (289) 288-1206 or email us to arrange an appointment to have us review your tax situation and look for opportunities to reduce your family tax bill.

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