Key credits for 2025: Age Amount ($8,790), Pension Income Credit (up to $300 federal), pension income splitting, OAS clawback threshold ($90,997), and numerous provincial credits most seniors never claim.
Most retirement income in Canada is taxable. OAS, CPP, RRIF withdrawals, and employer pension payments all count as income for tax purposes. Understanding which income sources are taxable, which are partially sheltered, and which are tax-free is the foundation of senior tax planning.
| Income Source | Taxable? | Notes |
|---|---|---|
| OAS | Yes — fully | Subject to clawback above $90,997 |
| CPP/QPP | Yes — fully | Can split with spouse |
| RRIF withdrawals | Yes — fully | Minimum withdrawals required at 72 |
| Employer pension | Yes — fully | Eligible for pension income credit |
| TFSA withdrawals | No | Completely tax-free |
| GIC interest | Yes | Taxed as interest income |
| Capital gains | 50% included | Inclusion rate may change — confirm annually |
| GIS | No | Guaranteed Income Supplement is tax-free |
If you were 65 or older on December 31 of the tax year, you can claim the Age Amount — a non-refundable federal tax credit. For 2025, the Age Amount is $8,790. At the 15% federal tax rate, this credit reduces your federal taxes by up to $1,318.50.
The Age Amount is income-tested. It begins to phase out when your net income exceeds approximately $42,335 and is fully eliminated at approximately $98,309. These thresholds are indexed to inflation annually.
Most provinces also offer an Age Amount at the provincial level, further reducing your overall tax bill.
Canadians who receive eligible pension income can claim a federal pension income credit of 15% on the first $2,000 of eligible pension income — a maximum of $300 in federal tax savings. Provinces offer matching credits, bringing total savings to roughly $440–$600 depending on your province.
Eligible pension income includes payments from employer registered pension plans, RRIF withdrawals (for those 65+), and annuity payments from an RRSP. OAS and CPP do NOT qualify for the pension income credit directly, but can be split with a spouse to generate eligible pension income.
One of the most powerful tax strategies available to Canadian seniors is pension income splitting. You can allocate up to 50% of eligible pension income to your spouse or common-law partner, potentially moving income from a higher-tax bracket to a lower one.
Both spouses must file their tax returns to claim the split. The transfer is done on your returns using Form T1032 — it doesn't require the money to actually move between bank accounts.
Old Age Security is subject to a recovery tax (commonly called a "clawback") if your net income exceeds a threshold. For 2025, the clawback threshold is approximately $90,997. For every dollar above this threshold, 15 cents of OAS is clawed back. OAS is fully eliminated at approximately $148,451 in net income.
Strategies to reduce or avoid OAS clawback include:
RRSPs must be converted to a RRIF (Registered Retirement Income Fund) or annuity by December 31 of the year you turn 71. Starting at age 72, you must withdraw a minimum percentage of the RRIF value each year. The minimum percentage increases with age — from about 5.28% at 72 to over 20% at 95.
These mandatory withdrawals are fully taxable. Planning your drawdown strategy before age 71 can minimize the tax impact of large mandatory withdrawals later.
Canadian seniors often have significant medical expenses. You can claim a federal non-refundable Medical Expense Tax Credit (METC) for eligible expenses above the lesser of $2,635 (2025) or 3% of your net income. Eligible expenses include:
If you have a severe and prolonged mental or physical impairment, you may qualify for the Disability Tax Credit (DTC). The DTC provides a significant non-refundable credit — worth over $1,500 federally in 2025. To claim it, you need a medical practitioner to certify your condition on Form T2201.
Many seniors with chronic conditions qualify for the DTC but have never applied. Conditions like severe arthritis, vision loss, and cognitive impairment may qualify.
If you support a dependent with a physical or mental infirmity (including an aging parent), you may be able to claim the Canada Caregiver Credit. This credit acknowledges the financial burden of supporting a dependent who has a significant health impairment.
KOHO's no-fee account helps Canadian seniors keep more of their OAS and CPP payments. No monthly charges, no minimum balance, and easy to use on any phone. Use code 45ET55JSYA for a sign-up bonus.
Get KOHO Free — Use Code 45ET55JSYACRA's NETFILE system is free to use and available to most Canadian seniors. Free tax software certified by CRA includes Wealthsimple Tax, TurboTax (free basic version), and SimpleTax. For seniors with low to modest income, the Community Volunteer Income Tax Program (CVITP) offers free tax preparation assistance through community organizations.
To access CVITP services, contact your local CRA office or visit the CRA website for a list of clinics in your area.
Most provinces offer additional age-related or income-tested tax credits for seniors. These vary significantly by province. British Columbia, Ontario, Alberta, and Quebec all have senior-specific credits that reduce provincial income taxes. Check your province's current tax credit schedule when filing.
Canadian tax law provides substantial benefits for seniors, but many of these credits require active claiming — they're not applied automatically. Working with a tax professional or using comprehensive tax software ensures you capture every eligible deduction and credit. The difference between a basic filing and an optimized senior return can easily be $1,000–$3,000 per year.