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The impact of income-based clawbacks8 z& ~# q$ n& B! f. C, r$ B
A common assumption made during retirement planning is that an individual will7 ^( l8 A5 ?( T3 O; j* v
be subject to a lower marginal income tax rate upon retirement than he or she will be beforehand. This may sound logical, but it is often not true when considering income-based clawbacks that apply to several programs for seniors. The three main clawbacks that a ffect seniors apply to Old Age Security (OAS), the Guaranteed Income Supplement (GIS) and the age tax credit.( ~8 ?6 c9 Q9 A
• OAS is $6,203.52, which is reduced by 15 per cent of net income in excess of $66,335.
$ s. o. F: G. }$ K1 pOAS is eliminated when net income is equal to or greater than $107,692.
5 c' J, \0 G$ y' N• The GIS is a tax-free amount that does not exceed $7,830.12, which is paid to seniors with a net income of less than $15,672, excluding OAS and the GIS. For a senior who is single or widowed, $1 of the GIS is subject to a clawback for every $2 of non-OAS income received.
4 \, {" ?4 G. l. A$ c• The age tax credit is a non-refundable tax credit available to seniors in an amount
9 b) [8 a5 \$ P6 T# Sequal to 15 per cent of $6,408, which is reduced by 15 per cent of net income in excess of $32,312. The age tax credit is eliminated when net income is equal to or greater than $75,032.% K. r t% i, A1 |0 R3 G$ X
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For example, a non-senior earning $8,882 annually will pay taxes of 15 per cent on each additional dollar earned up to $10,100, at which point the marginal tax rate will increase to 21 per cent. However, a senior earning $8,882 will essentially pay taxes of 65 per cent on each additional dollar earned: 15 per cent for income taxes and 50 per cent for the GIS clawback (i.e., the GIS bene fit will be reduced by 50 cents for the additional dollar)." j& B, F# d2 @4 D7 r h
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5 O; o( |1 f8 S; `) j2 D6 z- xGiven that a withdrawal from an RRSP is included in taxable income, it may not make sense to contribute to an RRSP unless you are currently in a high tax bracket. A contribution to a TFSA may be preferable, given that a withdrawal is not included in income and, thus, is not a factor in any of the three incomebased clawbacks./ O$ E& A( C( _: p* I' P: C( k. _
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Camillo Lento
. ?4 D Z ~ q" n0 @Faculty of Business Administration
- B" d% Z! L" R5 l# X% mLakehead University, under Bay, ON |
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发表于 2010-3-2 11:54
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发表于 2010-3-14 18:11
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