Was your OAS clawed back? Fight the claw-backs - reduce line 234

Dividend income can be the least "income -friendly" to retirees because the grossed -up amount is reported on their tax returns.  Although the dividend tax credit provides preferential tax treatment, the grossed-up amount exaggerates the total income online 234. 

Canadians age 65 and older may qualify for many valuable government benefits - Old Age Security and the Age Credit, are examples.  However, if the income reported on line 234 of the Federal Income Tax Form is too high, these benefits can be clawed back and, in some cased, forfeited altogether. This can result in the loss of thousands of dollars in benefits. 

Want to take an in-depth look at the issue...and the opportunities?

Avoiding claw-backs takes more than simply creating tax credits - which reduce the taxes owing.  It is important to look at ways to actually reduce reported income.  However, when retirement arrives, most of the fimilar deductions (RRSP, pension, child care, union dues, etc) are no longer avaialble. 

We have 2 solutions to achieve this goal:

1.  Carefully structure your non-registered income - Active management of income-generating investments can significantly affect the way income is taxed, and may help reduce claw-backs.  We can help. 

2.  Create dollar-for-dollar tax deductions - RSP top-up, those with unused RRSP room should make a lump sum final contribution prior to converting to a RRIF.  The resulting deductions can be spread over several years...Borrow-to-invest is another strategy, by using discretionary income to pay the interest on funds borrowed to invest, a tax deduction can be created.  This strategy is for investors with discretionary income not needed for living expenses. 

For more information, we would be happy to talk to you.

Michele Wells CCS, CHS Financial Advisor Manulife Wealth Inc.

Focused WealthCare Balancing Finances & Lifestyle

call (807)684-1900 fax (807)626-5111 email Michle.Wells@manulifesecurities.ca

find me on linkedIn

This is for information purposes only.  Thank you