Retired Money: How tax filing changes in Semi-Retirement

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Here is my latest MoneySense Retired Money column: Tax filing advice for retirees.

It relates my personal experience of filing this year’s tax returns for the 2016 calendar year.

There is quite a difference between the key tax documents when you’re a full-time employee and the ones you receive when you’re fully retired. And in semi-retirement, it’s an interesting combination of both. Instead of T-4 slips from full-time employers, and RRSP receipts that help you minimize the high tax rates of employment, the semi-retiree now may be receiving T4A slips that tell you (and the Government) how much pension income you received in the prior calendar year and how much (if any) tax was withheld at source.

And the mirror image of the RRSP receipt in retirement or semi-retirement is the T4RSP slip, which tells you how much money you withdrew from your RRSP and how much (if any) tax was withheld at source.

The article also links to an earlier Retired Money column on “Topping up to Bracket,” which describes how you really want if at all possible to tap into the roughly $20,000 “Tax-free” zone made up of the Basic Personal Amount ($11,474 in 2016, which rises to $11,635 in 2017), another $2,000 for the Pension Credit and for those who are 65, the $7,125 Age Credit.

Age Credit escapes the axe … for now

As I noted in my Budget blog last night and this morning, despite fears that the Age Credit might be the victim of the Liberal zeal to jettison costly tax credits, evidently the fear of offending the 5.2 million seniors affected stayed the hand of Finance Minister Bill Morneau. While it is income-tested, for modest-income seniors I view the Age Credit as essentially making Old Age Security (OAS) benefits tax-free, assuming they are commenced also at the magical age 65.

Of course, all the post-budget speculation revolves around the fact that once Ottawa gets more insight into the tax-cutting efforts of the Trump administration south of the border, all bets could be off by the end of the year. The Baby boomers of which I am a member are rapidly approaching Age 65 (a year to go for Yours Truly) and it would be so typical that just as we pass the Retirement finishing line that the Liberals would move the goalposts. The same goes for capital gains; we can breathe a sigh of relief that the 50% inclusion rate on capital gains has for now been preserved: I can attest to the complexity of going through past capital losses and gains to say that merely from a tax preparation perspective, any tinkering with capital gains rules would be immensely frustrating.

A reminder that the tax filing deadline this year falls on May 1st, as the normal April 30th falls on Sunday.

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