Taxes in Canada
When you work, your employer calculates salary deductions based on the Canadian Income Agency (CRA) salary scale to deduct them from your salary. If you have no other source of income and no tax deductions or tax credits, you may not owe taxes and there is no refund at the end of the year.
When you retire, it works differently. Since you may have different sources of income, different sources of income, different tax rates, or lack of tax rates, it may lead to uncertain income tax results. Usually, retirees end up owing taxes. It is important to plan for this.
That is, the total tax rate paid by taxpayers tends to lower retirement. So despite taxes, the total tax level per dollar is usually less than when you were working.
learn more: How to manage retirement taxes
CPP
When you apply for a Canadian Pension Plan (CPP) retirement pension, you have the option to voluntarily deduct income tax. When submitting your initial application, you can choose the amount or percentage of your pension.
The reason for proposing such voluntary tax cuts is because by default, CPP does not have withholding taxes. As a result, the standard 0% withholding rate tends to result in arrears when used in conjunction with other sources of income.
You can also ask Canadian Services to start deducting taxes on pensions after the initial application.
OAS
Older safety (OAS) has the same voluntary tax cut elections as available after the initial application or after; however, there is also an involuntary pension tax, commonly known as OAS rebates.
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Unlike CPP, OAS pension is a balanced pension. Low-income recipients with very few incomes may be eligible for additional Guaranteed Income Supplement (GIS) to increase their OAS pensions.
High-income retirees who earn more than $93,454 in 2025 will find that some of their pensions are paid for pension recovery tax. Rebates apply at a rate of 15% above the threshold for every dollar.
The relevant income considered for OAS rebates is the net income of 23,600 rows of your tax return. Thresholds are indexed to inflation each year.
RRSP/RRIF
Registered Retirement Savings Plan (RRSP) always pays withdrawal taxes unless you withdraw money under a program such as the Home Buyer Plan (HBP) or Lifelong Learning Plan (LLP). Withdrawal rate increases the larger withdrawal, which exceeds $15,000.
Most retirees convert their RRSP into a registered retirement income fund (RRIF), no earlier than December 31, when they are over 71 years old, but you can do so earlier, which usually makes sense if you withdraw money regularly.
The year after converting from RRSP to RRIF, you need to start taking the minimum withdrawal every year. This minimum withdrawal is the percentage of the account value as of December 31 last year, as it ages.
There is no withholding tax on minimum evacuation, but that doesn’t mean it is not taxable. Like CPP, OA and other sources of income, when you report this income on a tax return, you can calculate the actual tax.
The lack of taxes on minimum RRIF withdrawals usually means you end up owing taxes when you submit. You can also voluntarily tax the RRIF withdrawal from financial institutions.
