Turning 65 is a significant milestone that brings changes to your finances, including tax credits and government benefits. Understanding these adjustments can help you maximize your income and avoid surprises. Here are five key credits and benefits that change once you turn 65.
1. Age Amount Tax Credit
The age amount is a non-refundable tax credit for individuals aged 65 or older. For 2025, the maximum amount is $8,396, which translates to a federal tax credit of up to $1,259. This credit begins to phase out when your net income exceeds $42,335 and is fully eliminated at around $98,000. Ensure you claim this credit on your tax return to reduce your federal income tax.
2. Pension Income Splitting
At age 65, you become eligible to split up to 50% of your eligible pension income with your spouse or common-law partner. This can lower your overall tax bill by shifting income to a partner in a lower tax bracket. Eligible pension income includes payments from a registered pension plan, RRIF, or annuity. Note that CPP and OAS payments are not eligible for splitting.
3. Guaranteed Income Supplement (GIS)
The GIS is a monthly benefit for low-income seniors receiving Old Age Security (OAS). To qualify, you must be 65 or older and meet income thresholds. For 2025, the maximum GIS amount is $1,086.88 per month for a single individual. Your OAS pension must be approved first. GIS payments are tax-free and adjusted quarterly for inflation.
4. Old Age Security (OAS) Pension
You can apply for OAS at age 65, even if you are still working. The maximum monthly OAS payment for 2025 is $727.67. However, if your net income exceeds $90,997, you may have to repay part of your OAS through the OAS recovery tax (clawback). You can defer OAS up to age 70 to receive a higher monthly amount.
5. Canada Pension Plan (CPP) Post-Retirement Benefit
If you continue working after age 65 while receiving CPP, you can contribute to the CPP and earn a Post-Retirement Benefit (PRB). This increases your CPP income for life. The PRB is calculated based on your earnings and contributions after age 65. You can also choose to stop contributing at age 65 if you prefer.
Additional Considerations
- Medical Expense Tax Credit: You may claim eligible medical expenses for yourself and your spouse, which can be more beneficial at 65 due to higher health costs.
- Disability Tax Credit: If you have a severe and prolonged impairment, you may qualify for this credit, which can be transferred to a supporting family member.
- Home Accessibility Tax Credit: This credit helps seniors with renovations to make their home more accessible or functional.
Consult a tax professional or financial advisor to optimize your benefits based on your personal situation. Planning ahead can ensure you make the most of these changes when you turn 65.
