Sylvain Moreau
Partner | FCPA, FCGA, Pl. Fin., D. Fisc., TEP | Tax

In preparation for your old age, you regularly put money aside to fund your retirement projects. Here are a few tips for reducing your taxes at retirement and preventing the Tax Man from taking a significant chunk of your savings.

1. Since your personal tax rate is based on your total income, make sure to contribute to your spouse’s RRSP so that your pension fund will be divided between the two of you. Upon retirement, you will have succeeded in splitting your income, which will reduce your tax bill.

2. If your spouse’s pension income is lower than yours, because the RRSP contribution had not been maximized over the years, for example, every year, you can allocate up to half of your own pension income from your RRSP or pension fund, other than government funds. Make sure you do this every year.

3. Ask the Régie des rentes du Québec (RRQ) to share your pension. This way, you will reduce your income and the related taxes.

4. Since all tax-free investment income accumulating under your RRSP will be entirely taxable once it is withdrawn, be sure to hold investments that generate interest through your RRSP.

5. Benefit from the advantageous tax rates of capital gains and dividends by personally holding investments with this kind of income. Upon retirement, you will benefit from a 27% income tax rate applicable to capital gains and 40% for dividends.

Our recommendations

  • With regard to the 2nd tip, remember that public pension plan income (federal Old Age Security and the RRQ) cannot be split with your spouse.
  • If you receive income from your RRSP or private pension fund, you could benefit from a $2,000 pension credit each year that can reduce your taxes. Splitting your pension income will enable your spouse to also benefit from this credit.
  • When you retire, if you continue to receive investment income from non-RRSP investments, you will be able to continue deducting your investment and interest expenses.
  • Since the tax rules change regularly, make sure you review your retirement planning in order to reflect these changes.
  • Get advice from your tax specialist who can suggest strategies tailored to your personal situation.

This article was published in French in Journal de Montréal and Journal de Québec on 2018, February 17. Sylvain Moreau is Tax Partner and columnist for the Argent – Dans vos poches section.

28 Feb 2018  |  Written by :

Sylvain Moreau is a partner at Raymond Chabot Grant Thornton. He is an expert in taxation for the...

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