Tax checklist for retirees

You’re retired and not quite sure what you need to know and do about your taxes. A tax-efficient strategy in retirement can help you take advantage of the many tax incentives and credits available to retirees in Canada. To help you get ready to file your taxes this year, here’s a checklist of steps you can take to reduce your taxes in retirement and keep more of your hard-earned retirement income.

woman holding a credit card and looking at a laptop

1 Make a list of your sources of retirement income

Make a list of your sources of retirement income to help you figure out what’s taxable and what’s not. 

Taxable 

  • Income from registered savings plans 
  • Investment earning on non-registered accounts 
  • Income from a Registered Retirement Income Fund (RRIF)
  • Income from a Life Income Fund (LIF) 
  • Old Age Security (OAS) and Canada Pension Plan/Quebec Pension Plan (CPP/QPP)
  • Other types of income, such as employment income 

Non-taxable

Withdrawals from a tax-free savings account (TFSA)

2 Gather your statements and documents

Make a list of your tax documents, such as T slips (T4, T5, etc. — Quebec residents also receive RL slips), summary of transactions for non-registered accounts, charitable giving, rental income, and all other sources of income and documents that you think you might need to file your tax return this year. 

Make a note on the list if you've signed up for digital statements or if you think paper copies will be coming in the mail. Check with your financial institution on when to expect these slips. If you’re a Manulife member, you can find this info on the tax receipts and slips page

A good practice is to have a dedicated file for all your tax-related documents when you receive, print, or download them. Be careful to keep any personal digital documents stored safely on your devices.

3 Check if you're already paying tax on your retirement income

You might already be paying tax on your retirement income. The amount of tax you pay when you file your taxes depends, in part, on if you’ve been paying taxes on your income throughout the year.

You had to file and pay taxes when you were working. Your taxes, in most cases, might have been deducted at source, meaning they were collected every pay period and paid directly to the Canada Revenue Agency or Revenu Québec. 

Now that you’re retired, your taxes may not always be deducted at source. This means you might end up owing some taxes when you file your tax return, especially if your retirement income is coming from sources such as your Registered Retirement Savings Plans, investment earnings from non-registered accounts, CPP/QPP, OAS, and more. 

You can figure out if taxes are being deducted at source by checking your statements and tax slips and communicating with your financial institution. If taxes aren't being deducted at source, you can plan ahead and set aside funds for the taxes you might owe at tax time throughout the year.

Depending on your income, you may need to make tax installment payments on a quarterly basis, which is like a prepayment of your estimated tax payable instead of paying your tax once a year.

4 Look for pension income-tax credits and benefits 

Retirees are eligible for a variety of benefits. When preparing your taxes, it can pay to get familiar with several tax benefits and incentives. 

Here are some examples:

The following Government of Canada websites may be helpful:

There's also a dedicated federal government website for seniors that provides a wider overview of available programs. Many provincial governments, such as Ontario, have similar websites dedicated to senior programs and services. 

5 Check with your financial advisor on tax strategies in retirement

A smart tax strategy can have a big impact on how much tax you’ll pay when you’re retired. A trusted financial advisor can help you with your tax planning strategy at tax time and throughout the year to reduce your taxes in retirement. 

A note about withdrawal strategies

Throughout the year, not just at tax time, it’s up to you to determine the best retirement withdrawal strategy for your situation to remain in the lowest tax bracket possible

Working with a financial advisor could help you keep more of the income you receive so you can enjoy the retirement lifestyle you worked and planned for. 

6 Remember to file on time

Mark your calendar to help you remember to file your tax return before this year’s deadline: May 1, 2023.

The commentary in this publication is for general information only and should not be considered legal, financial, or tax advice. Individuals should seek the advice of professionals to ensure that any action taken with respect to this information is appropriate to their specific situation.