VANCOUVER, British Columbia, Feb. 24, 2020 (GLOBE NEWSWIRE) -- Are you turning 65 or older? Here are some tax tips from the Chartered Professional Accountants of British Columbia (CPABC) to make sure you maximize your tax savings:
1. Get your benefits
If you’ll soon be turning 65, make sure you have applied to receive your Old Age Security and, if you haven’t done so already, consider applying to Canadian Pension Plan (CPP). The default age to claim CPP pension benefits is 65, but you can choose to begin receiving your pension benefits as early as age 60, at a cost of reduced monthly benefits, or you can choose to delay receiving your pension benefits until after age 70 to receive increased monthly benefits.
2. Start making plans for your RRSP funds
You must wind up your RRSP by December 31 of the year you turn 71. However, a complete withdrawal at that time is usually not the best option, because your entire RRSP balance will be taxed in the one year. Instead, consider transferring your RRSP funds on a tax-deferred basis to a Registered Retirement Income Fund (RRIF), or use your RRSP funds to purchase an annuity. Either of these options will pay you a taxable income stream over time. Note: There are significant differences between a RRIF and an annuity – you should consult with a chartered professional accountant or investment advisor before making your decision.
3. Divide and conquer (your pension income)
Consider splitting your pension income with your spouse to allow the higher-earning individual to share up to half of their pension income (excluding the Canada Pension Plan) with their lower-earning spouse. This will help level your income so one person isn’t taxed significantly more than the other. Consider consulting a chartered professional accountant early in the year to make sure pension splitting won’t affect your income tax brackets.
4. Retain your medical expense records
In certain circumstances, you can claim a tax credit for medical expenses. For 2019, the tax credit is available only on the portion of the medical expenses that exceeds the lesser of 3 per cent of your net income or $2,352 for federal tax purposes, and $2,221 for B.C. tax purposes.
The following are considered medical expenses:
- payments to private health insurance plans (e.g. medical insurance for your cruise trip to Alaska);
- fees to optometrists, dentists, and chiropractors;
- the cost of prescription glasses and contact lenses, medical lab tests, hospital services and treatments, prescription medication; and
- medical devices such as artificial limbs and dentures.
The list above is not exhaustive. If you have any questions regarding what is considered a medical expense, consult a chartered professional accountant.
5. Report your foreign property, snowbirds!
If you spend the winter months living in your vacation home in Maui and then rent it out during the rest of the year, you will be required to file a U.S. income tax return and report that income on your Canadian income tax return. You must also indicate whether your foreign property is worth over $100,000. The foreign property reporting requirements are complex, and failure to comply can result in significant penalties.
Contact a chartered professional accountant to help you understand the complications within your income tax return. Learn more at CPABC’s RRSP and Tax Tips at rrspandtaxtips.com.
NOTE TO JOURNALISTS: CPAs are available for interview. Infographic is available for reprint.
Please credit Chartered Professional Accountants of British Columbia (CPABC) for use of the content and include the following disclaimer: Tax rules relating to these RRSP tips are complex. This is not intended as tax advice, and you should not make tax decisions based solely on the information presented in these tips. You should seek the advice of a chartered professional accountant before implementing a tax plan or taking a tax filing position.
About CPA British Columbia
The Chartered Professional Accountants of British Columbia (CPABC) is the training, governing, and regulatory body for over 37,000 CPA members and 5,000 CPA students and candidates. CPABC carries out its primary mission to protect the public by enforcing the highest professional and ethical standards and contributing to the advancement of public policy.
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