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The impact of income-based clawbacks4 @; O3 h x" t0 T F" I J
A common assumption made during retirement planning is that an individual will; a# h2 t( K4 E0 x0 U X. M
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.
6 t& O$ b$ y5 u+ ^9 j% W5 O• OAS is $6,203.52, which is reduced by 15 per cent of net income in excess of $66,335.. F, ^ k6 F. a' l
OAS is eliminated when net income is equal to or greater than $107,692.
5 }4 |& M7 K/ o8 U• 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 $2 of non-OAS income received.4 ], j% b0 D6 }' Y3 u
• The age tax credit is a non-refundable tax credit available to seniors in an amount
3 v1 V4 {+ f" p$ D3 Eequal 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 $75,032.
6 ?5 i8 d# {; W8 D9 N$ F* V7 A7 J$ B9 O8 H' y/ f- A- N- u
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 $8,882 will essentially pay taxes of 65 per cent on each additional dollar earned: 15 per cent for income taxes and 50 per cent for the GIS clawback (i.e., the GIS bene fit will be reduced by 50 cents for the additional dollar).% |' r, ?# m: q
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% |3 ~' {6 W' M! v% K% [Given that a withdrawal from an RRSP is included in taxable income, it may not make sense to contribute to an RRSP unless you are currently in a high tax bracket. A contribution to a TFSA may be preferable, given that a withdrawal is not included in income and, thus, is not a factor in any of the three incomebased clawbacks.$ Q5 q+ L; r0 k! i- w
* F7 y1 F1 H" E. F8 QCamillo Lento3 \& R8 I6 b" n2 I; g, B
Faculty of Business Administration
' O. N* ^$ H+ ]Lakehead 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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