FPSB Retirement & Tax Specialist cheat sheet

Registered pension plan (RPP) contributions are deductible, but the pension adjustment (PA) reduces the following year's RRSP deduction limit; PA approximates the value of the employer's promise for that year.

RRSP deduction limit = 18% of prior-year earned income, minus the PA and past service pension adjustment (PSPA), plus unused room carried forward; the annual money-purchase cap applies (a fixed dollar ceiling indexed periodically).

Earned income for RRSP purposes includes employment, self-employment and net rental income, but excludes pension income, retiring allowances, RRSP/RRIF withdrawals and investment income.

RRSP must be matured by the end of the year the annuitant turns 71; options are a RRIF, an annuity, or a lump-sum withdrawal (fully taxable).

RRIF minimum withdrawal = fair market value at the start of the year multiplied by the prescribed factor for the annuitant's age; the factor rises each year and is 1/(90 − age) for ages under 90 under the current schedule.

Spousal RRSP attribution: withdrawals are taxed to the contributing spouse if made in the year of contribution or the two following calendar years, to the extent of contributions in that period.

TFSA: contributions are not deductible and withdrawals are tax-free; the annual limit is indexed and unused room accumulates; re-contribution of a withdrawal is allowed only in the following calendar year (or later) without penalty.

CPP/QPP retirement pension can start as early as age 60 with a permanent actuarial reduction (0.6% per month before 65) or as late as 70 with an increase (0.7% per month after 65).

OAS pension clawback (recovery tax) applies when net income exceeds the threshold; the repayment rate is 15% of income above the threshold, fully repaid at roughly double the threshold.

Marginal tax rate = change in tax ÷ change in taxable income; the average tax rate = total tax ÷ total taxable income; decisions should be evaluated at the marginal rate.

Capital gains inclusion rate: a portion of realized gains is taxable (50% historically; a higher rate applied above an annual threshold under later proposals); only the taxable portion enters income.

Capital loss carryovers: net capital losses may be carried back three years and forward indefinitely, but can only offset taxable capital gains, not other income.

Superficial loss rule: a loss is denied if the same or identical property is acquired within 30 days before or after the sale by the taxpayer, the taxpayer's spouse or a controlled corporation.

Dividend gross-up and credit: eligible dividends are grossed up and a federal dividend tax credit is applied, reflecting integration so corporate income distributed as dividends is taxed roughly like income earned directly.

Attribution rules: income from property transferred to a spouse or minor child is generally attributed back to the transferor; capital gains may be attributed where the transfer is to a spouse.

Principal residence exemption: the gain on a designated principal residence can be reduced or eliminated; the formula is (1 + number of years designated) ÷ number of years owned, applied to the gain.

RRSP deduction timing: contributions in the first 60 days of a year may be deducted for that year or the prior year; the deduction can be deferred to a higher-income year subject to the limit.

Taxable benefit for employer-provided automobile = a standby charge plus an operating cost benefit; the standby charge is based on original cost and months available, with a reduced rate where personal use is mainly commuting.

Locked-in retirement accounts (LIRAs) and life income funds (LIFs) arise from RPP transfers and are subject to pension legislation withdrawal restrictions, unlike RRSPs.

Defined benefit pension valuation uses a commuted value based on actuarial assumptions (interest, mortality, indexing); the commuted value is not the same as total contributions.

Retirement income sequencing: taxable withdrawals from RRIFs and pensions increase net income and can trigger OAS clawback and reduce income-tested benefits such as GIS.

GIS is income-tested and reduced by other income (except OAS); RRIF withdrawals therefore reduce GIS dollar for dollar in part, making TFSA withdrawals preferable for low-income retirees.

The RRSP contribution deadline is 60 days after year-end; the deduction may be claimed in the contribution year or carried forward.

Pension income splitting: up to 50% of eligible pension income (including RRIF income after age 65) may be allocated to a spouse, which can reduce combined tax.

RRSP over-contribution: a lifetime cushion of $2,000 is permitted without penalty; excess contributions beyond the cushion attract a 1% per month penalty tax.

Withholding tax on RRSP/RRIF withdrawals: rates are graduated (e.g., 10% up to $5,000, 20% on the next tier, 30% above), and the final tax liability is settled on filing.

Taxable income = total income minus deductions (e.g., RRSP contributions, union dues, moving expenses); non-refundable credits are then applied to reduce tax payable.

Non-refundable credits are calculated at the lowest tax rate, so their value does not increase with the taxpayer's marginal rate; refundable credits and deductions behave differently.

Income splitting with a spouse: pension income splitting, spousal RRSP contributions and prescribed-rate loans can shift income to a lower-bracket spouse.

Prescribed-rate loan: a loan to a spouse at the CRA prescribed rate avoids attribution if interest is paid by January 30 each year; the rate is fixed at the time the loan is made.

Marginal effective tax rate on dividends differs between eligible and non-eligible dividends because of different gross-up and credit rates; eligible dividends generally attract a lower effective rate for high earners.

Donation tax credit: the first $200 of donations receives the lowest-rate credit; amounts above $200 receive a credit at the highest rate, so batching donations into one year increases the benefit.

Medical expense credit: expenses must exceed the lesser of a fixed threshold and 3% of net income; expenses can be claimed for any 12-month period ending in the tax year.

Capital gains reserve: a portion of the gain can be deferred when proceeds are received over several years, with a minimum of 20% recognized each year (five-year maximum, extended for certain transfers).

Instalment payments are required when net tax owing exceeds a threshold in the current and either of the two prior years; interest is charged on late or insufficient instalments.

RRIF minimum withdrawals are mandatory each year; amounts above the minimum are optional, and withholding tax applies only to amounts above the minimum.

A defined contribution (money purchase) plan's retirement benefit depends on contributions plus investment returns; the pension adjustment for a DCPP equals contributions made in the year.

The annual RRSP contribution limit is the lesser of 18% of prior-year earned income and the money-purchase limit; unused room does not expire.

CPP survivor's pension and children's benefits are separate from the retirement pension and are not reduced by RRIF withdrawals, but the survivor's pension is combined with the retirement pension under a maximum.

Retirement planning should compare after-tax outcomes: RRSP withdrawals are fully taxable, TFSA withdrawals are tax-free, and non-registered capital gains are only partly taxable.

The OAS Guaranteed Income Supplement is available to low-income seniors and is reduced by income other than OAS; delaying CPP can increase lifetime income but reduces GIS in the same year.

Tax brackets are progressive: each rate applies only to income within its band, so the marginal rate rises while the average rate remains below the top marginal rate.

The basic personal amount is a non-refundable credit that shelters a base amount of income; it is reduced for high-income taxpayers under the current phase-out rules.

Self-employment income is reported on a T1 with expenses deducted; CPP contributions are required on net self-employment income above the basic exemption.

Rental income: only the interest portion of mortgage payments is deductible, not principal; capital cost allowance may be claimed but can create recapture on sale.

Business investment loss (BIL): a capital loss on shares or debt of a small business corporation may be treated as an allowable business investment loss, half deductible against all income.

Tax-free transfer of a deceased's RRSP/RRIF to a spouse or dependent child is permitted; otherwise the full value is included in the deceased's final return.

GST/HST and payroll obligations are separate from income tax; tax planning for a business should consider salary versus dividend mix and the small business deduction.

Retirement income sources in Canada: CPP/QPP, OAS/GIS, employer pensions (DB or DC), RRSP/RRIF, TFSA and non-registered savings.

The CPP replacement rate is 25% of the contributor's average pensionable earnings (up to the yearly maximum pensionable earnings), with the enhanced portion adding a further tier.

Delaying CPP to age 70 increases the pension by 42% relative to age 65; starting at 60 reduces it by 36%.

RRIF payments can be based on the annuitant's age or the spouse's younger age if elected, which lowers the minimum percentage.

A RRIF can hold the same investments as an RRSP, but no new contributions are permitted after it is set up.

Deferring income and accelerating deductions lowers tax when the marginal rate is expected to fall in a later year; the opposite applies when rates are expected to rise.

Taxable capital gains are included in net income and can trigger OAS clawback and reduce credits, even though only part of the gain is taxed.

The lifetime capital gains exemption shelters gains on qualified small business corporation shares and qualified farm or fishing property, subject to a lifetime limit.

Estate planning: assets transferred at death are generally deemed disposed at fair market value, triggering capital gains unless a rollover (spousal or trust) applies.

Charitable donations of publicly traded securities are exempt from capital gains tax and still generate a donation credit.

Keeping receipts and records for six years supports deductions and credits; the CRA may reassess within the normal reassessment period (generally three years for individuals).