TORONTO, ONTARIO — (Marketwire) — 02/18/12 — As the February 29th deadline approaches to make a contribution to a Registered Retirement Savings Plan (RRSP) and as part of its ongoing commitment to improving financial literacy, BMO Financial Group will be providing daily retirement tips during the month of February from BMO Retirement Institute Head Tina Di Vito-s new book .
Tip Number 35:
Consider splitting income to pay less in taxes, now and during retirement
In the Canadian tax system, higher-income Canadians pay anywhere from 38 to 50 per cent in income tax, depending on the province or territory in which they live. Because Canadians file separate income tax returns from their spouse or common-law partner, there may be situations where one person is paying at the highest tax rate, while the other is paying no tax at all. If couples split their income as reported on their tax returns, they could save a great deal of tax. For example:
The simplified example above results in a savings of $3,000. Income splitting is not always automatic. Here are tips for couples to keep more of their income and pay less in income taxes:
Pre-retirement years:
During Retirement:
Tip Number 36:
Take steps to keep as much of your Old Age Security income as possible
Old Age Security (OAS) is paid to Canadians aged 65 and older who have lived in Canada for at least 10 years after their 18th birthday. Those that qualify for OAS get the maximum entitlement after 40 years of Canadian residency, which over a 25-year period can amount to $160,000. However, besides being subjected to income tax, OAS is also income-tested; this means that some or all of that amount may be paid in taxes if your income in retirement exceeds the annual threshold amount, which is approximately $69,562 for 2012.
For those in retirement, consider these strategies to keep as much of your OAS income possible:
For more information on retirement: .
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