Six tips for tackling your tax return in retirement
Learn how receiving a pension affects your tax return—and how you can make filing your taxes easier
Spring brings daffodils and sunny days, but it also brings tax deadlines. Your pension is taxable income, which means you’ll have some things to report on your tax return this April. This year, follow our tips to spend less time filing your taxes and more time celebrating spring.
1. Get your tax slip when you need it
Tired of waiting for the mail to arrive? Sign in to My Account today to view or print your latest tax slip. Tax slips are available on My Account by mid-January each year.
2. Keep us in the loop
Your pension will be by your side, no matter where you are. Let us know if your address or residency changes. Keeping your address up-to-date helps us:
- Make sure you receive important information from the plan
- Apply the right tax rate to your pension if you’re living outside BC
We use the tax rate provided by Canada Revenue Agency (CRA) for your province or country of residence. Contact CRA or a tax professional for more information.
3. Pay more upfront
We tax your pension as if it were your only source of income. You may owe more if you have other sources of income such as Canada Pension Plan payments or a part-time job. You can ask us to deduct more taxes from your pension each month to avoid owing a balance when you file. Contact us through My Account Message Centre if you’d like to increase your monthly tax deduction.
To help us complete your request, include the exact amount you’d like deducted from your pension. Describe the amount you want deducted in one of these ways:
- Total dollar amount
- Additional dollar amount
- Total per cent
4. Think inside the box
Your T4A from the plan shows a lot of important information. Here are some of the boxes you might see reported:
- Box 16
- The Income Tax Act (ITA) limits the maximum pension benefit you can receive from a registered pension plan; box 16 shows the amount of your pension payments up to that limit
- The amount in box 16 is the amount eligible for income splitting
- Box 109
- Box 109 shows the amount of your pension payments over the maximum pension benefit limit set by the ITA
- Payments above this limit are also called “supplemental benefits” and are usually a result of earning a high income before retirement
- The amount in box 109 is not eligible for income splitting
- Box 135
- Box 135 shows premiums you paid for extended health and dental coverage through the plan
- You may be eligible to claim this amount as a medical expense on your tax return
- Contact a tax professional or visit the CRA website to learn more about eligible medical expenses
5. Consider your spouse
If your income is higher than your spouse’s, you may be able to transfer some of your pension income to them. This is known as income splitting.
In some cases, income splitting may reduce the taxes you owe. However, depending on your personal circumstances, income splitting may not be the right choice for you. For help understanding how income splitting may affect you, talk to your financial adviser or a tax professional.
6. Connect with an expert
Your tax situation may be complex, especially if you have more than one source of income. Your financial adviser or a tax professional can help.