The Monthly Letter
Three tax credits retired Canadians leave on the table
They are not loopholes and they are not new. They are standard lines on the return that get skipped because nobody mentions them.
Nothing on this page is a loophole, a scheme, or anything recently introduced. All three are ordinary, long-standing lines on the Canadian personal tax return, available to very large numbers of retired people. They get missed for a dull reason: nobody tells you about them, and the return does not ask.
Each is worth looking up on the Canada Revenue Agency’s own pages, where the current year’s amounts and conditions are published. The figures change annually, so what follows describes how each one works rather than quoting a dollar value that will be out of date.
Why they get missed
Three reasons, all structural rather than anyone’s fault.
Employment made it automatic. For a working life, credits were largely handled through payroll. Retirement moves responsibility onto an annual return that most people fill in once and then copy forward.
The first retired return sets the pattern. If a credit is missed in the first year it tends to be missed in every subsequent one, because the previous return is the template.
Low income feels like a reason not to bother filing. It is the opposite. Several of the things a retired household depends on — the Guaranteed Income Supplement among them — are recalculated annually from the return. Not filing does not avoid tax; it interrupts benefits.
1. The pension income amount
This is a non-refundable credit on line 31400 for people reporting eligible pension income. It is not means-tested and it is not obscure — it is simply a credit that requires you to have a qualifying kind of income and to claim it.
The thing to understand is which income qualifies, because it is narrower than “money I live on in retirement”:
- A workplace pension — a life annuity from a registered pension plan — generally qualifies.
- RRIF and annuity income generally qualifies once you are 65 or older.
- CPP and OAS do not qualify for this credit, despite being pensions in every ordinary sense.
That last point produces a real planning consequence. Someone aged 65 living entirely on CPP and OAS has no eligible pension income and so cannot claim the credit. Converting even a modest amount of RRSP savings into a RRIF can create qualifying income — which is one of the reasons the conversion decision is not purely about the deadline at 71.
It also interacts with pension income splitting: allocating eligible pension income to a spouse can make the credit available on their return too.
2. The age amount
The age amount, at line 30100, is a non-refundable credit for people who are 65 or older at the end of the tax year. Age is the only entry requirement.
Two features define how it behaves:
- It is reduced as income rises above a threshold, and phases out entirely at a higher one. Both figures are indexed annually and published by the CRA.
- Because it reduces with income, it is one of the credits most affected by decisions about when to realise income — a large RRIF withdrawal or a capital gain in one year can erode it for that year.
It is also transferable to a spouse where it cannot be fully used, which is covered below.
3. Medical expenses
Medical expenses are claimed on lines 33099 and 33199, and this is the one where households most often leave money unclaimed — because the eligible list is much longer than people assume and because the claim rewards record-keeping nobody enjoys.
The general shape of the rule is that you can claim eligible expenses above a threshold calculated from your net income, for a period you choose ending in the tax year. Three practical points follow:
- Pool the household’s expenses. They can generally be combined and claimed together rather than split across two returns, which matters because of the income-based threshold.
- Claim on the lower-income return where that produces a better result, since the threshold is calculated from net income.
- The eligible list is broad. Prescription medication, dental work, eyeglasses and contact lenses, hearing aids and batteries, prescribed devices and equipment, attendant and nursing-home care, and travel for treatment not available locally all commonly appear on it. Check the CRA’s own list rather than guessing in either direction.
The practical habit that makes this work is a single envelope, kept for twelve months, into which every receipt goes. The claim is not difficult; reconstructing a year of receipts in April is.
Where a disability is involved, there is also a separate and more substantial disability tax credit, which requires certification by a medical practitioner and opens access to other programmes. It is a different claim from medical expenses and is worth investigating on its own terms.
Unused credits can move
Non-refundable credits reduce tax payable. They cannot reduce it below zero, so a person with little tax to pay may be unable to use a credit they are entitled to.
Several credits — the age amount and the pension income amount among them — can be transferred to a spouse or common-law partner where they cannot be fully used on the original return. For couples with uneven incomes this is straightforwardly worth checking, and it is the kind of thing tax software handles well if both returns are prepared together rather than separately.
You can usually go back
A credit missed in a previous year is generally not lost. The CRA allows prior-year returns to be adjusted, and a correction that applies to several consecutive years can be requested for each of them.
That is the real argument for reading this with last year’s return in front of you. If the age amount was never claimed since you turned 65, or medical expenses were never pooled, the fix is not limited to the year ahead.
The afternoon that pays for itself
Take last year’s return. Check line 31400 for the pension income amount, line 30100 for the age amount, and lines 33099 and 33199 for medical expenses. If any of the three is blank and should not be, look at whether the same is true of the years before it. For a great many retired households that is an hour’s work with a recurring return.
One email a month: what changed in Canadian pensions and taxes, and what it means in dollars. Free.
Official sources
- Canada Revenue Agency — Pension income amount (line 31400) — which income qualifies and how to claim it
- Canada Revenue Agency — Eligible medical expenses (lines 33099 and 33199) — the eligible expense list, the income-based threshold and which return to claim on
- Canada Revenue Agency — Deductions, credits and expenses — the index of claim lines, including the age amount at line 30100 and the current indexed figures
- Canada Revenue Agency — Disability tax credit — the separate certified credit referred to above
Candy On Bone is published by SPV Consulting Estonia OÜ and provides general information about Canadian public pensions and taxes. It is not a Government of Canada, Service Canada or Canada Revenue Agency publication and has no affiliation with them. Nothing here is financial, tax or legal advice, and no figure in this article is a promise, quotation or entitlement for any individual reader. Benefit amounts and tax rules depend on personal circumstances and change over time; the figures cited were taken from the official sources listed above on . There is no application, registration or fee on this website for any government benefit. Never give your Social Insurance Number, banking details or government account credentials to a website in response to an article. Use My Service Canada Account or contact Service Canada for anything concerning your own payments.
