Retirement Income Options

RIF tax treatment

All RIF withdrawals are subject to income tax in the year that income is received. In the year the plan is opened, there is no prescribed minimum amount and all the income you withdraw is subject to withholding tax. Every year after that, you are only taxed at source on the amount that exceeds your prescribed minimum.

TD Canada Trust will send you a tax slip in time for tax season, reflecting all RIF income you received in the previous year, which should be included as taxable income with your tax return. The slip will also indicate any tax that was already deducted.

Tax tips for retirement income earners

1. Take advantage of the federal age tax credit on your tax return. If you're 65 or over, you may be eligible for an additional age deduction, depending on your income.
2. Use the pension tax credit. If you are 65 years of age or older, the first $1,000 of pension income is eligible for a 17% federal tax credit as well as a provincial tax credit that varies from province to province (some exceptions may apply).
3. Generate income from non-registered investments. It's generally better to draw income from non-registered investments before you use tax-deferred, registered assets.
4. Elect on your tax return to include all Canadian dividends received by the lower-income spouse as part of your income in order to maximize the spousal tax credit. This may not be advantageous in all situations, so be sure to check with your tax professional.
5. Assign 50% of CPP benefit payments to the lower-income spouse in order to tax the income at a lower rate. This may help you reduce or avoid the impact of the Old Age Security (OAS) clawback.
6. Make sure additional income doesn't have a negative impact on government payments and credits you may be eligible for. Before you withdraw additional income from your RIF or other retirement plan, find out what impact it may have. For example, if your income exceeds $62,144*, you would be subject to a clawback tax on your OAS payments. Age credits, GST credits and provincial tax credits could also be affected. Check Canada Customs and Revenue Agency Tax Guides and your provincial tax office for details.
7. Maximize spousal RSP contributions for the spouse who is expected to have the lower taxable income at retirement. This will permit more retirement income to be taxed at the lower rates.
8. Apply for the GST credit every year. You may qualify after you retire, even if you didn't before.
9. Combine your - and your spouse's - charitable donations on a single tax return to maximize the tax credit.
10. Transfer unused age, pension, disability, tuition and education tax credits from the lower-income spouse to the higher-income spouse.

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