Approaching the age of 65 marks a significant milestone in your financial life, as several government credits and benefits undergo changes. Understanding these adjustments can help you maximize your retirement income and avoid surprises. Here is a breakdown of what to expect.
Old Age Security (OAS) Pension
At age 65, you become eligible for the Old Age Security (OAS) pension, a monthly payment available to most Canadian seniors who have lived in Canada for at least 10 years after age 18. The amount is adjusted quarterly for inflation. However, if your net income exceeds a certain threshold (around $90,000 for 2026), you may be subject to the OAS recovery tax, which claws back 15% of the excess income.
Guaranteed Income Supplement (GIS)
For low-income seniors, the Guaranteed Income Supplement (GIS) provides additional financial support. It is available to OAS recipients with little or no other income. The GIS amount depends on your marital status and income, and it is tax-free. You must apply for GIS separately, and it is recalculated annually based on your previous year's tax return.
Canada Pension Plan (CPP) Enhancements
While you can start CPP as early as age 60, waiting until 65 increases your monthly benefit by 0.7% for each month you delay (8.4% per year). If you continue working after 65, you can still contribute to CPP through the Post-Retirement Benefit (PRB), which increases your retirement income. The CPP enhancement, phased in over several years, also boosts benefits for those who contributed after 2019.
Age Amount Tax Credit
Once you turn 65, you become eligible for the age amount tax credit, which reduces your federal income tax. For 2026, the maximum claim is approximately $8,000, but it is reduced if your net income exceeds about $40,000. This credit is non-refundable, meaning it can only reduce taxes owed to zero.
Pension Income Splitting
At 65, you can 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 income includes CPP, OAS, and private pension payments.
Medical Expense Tax Credit
As you age, medical expenses often increase. The medical expense tax credit allows you to claim eligible expenses that exceed the lesser of 3% of your net income or a fixed threshold (around $2,500 for 2026). This includes dental care, prescription drugs, and certain long-term care costs.
Home Accessibility Tax Credit
If you or a senior relative makes renovations to improve accessibility in your home, you may qualify for the Home Accessibility Tax Credit. This non-refundable credit covers up to $10,000 in eligible expenses per year, such as installing grab bars, ramps, or wheelchair lifts.
Understanding these changes can help you plan for a secure retirement. Consult a financial advisor or tax professional to tailor these benefits to your specific situation.
