Tax impact of additional income on retirement income
According to Statistics Canada, the proportion of Canadians aged 65 and over in the labour market has more than doubled over the past decade. Unfortunately, these additional earnings can have a significant impact on taxes. Here are some things to consider if you decide to work during retirement.
Seniors: did you know that income in addition to government pensions can change your tax bracket? It has a direct impact on your gross income. We strongly advise you to evaluate the impact of this additional income on your total after-tax income.
If you are already receiving a Quebec Pension Plan (QPP) pension, you will be entitled to an exemption for the first $3,500 of additional employment income. Above that amount, you will be required to start contributing to the QPP again. Note that these additional contributions will make it possible for you to increase the amount of your pension for the rest of your life. If you have not yet started receiving your pension, the government allows you to delay your retirement to age 70, which has the advantage of allowing you to increase your pension up to twice the amount.
Once you’ve done your calculations, if you still decide to earn extra income, here are two tips:
- Take this opportunity to increase your deductions at source;
- As a precaution, set some money aside in case you have to pay taxes.
You can also contact your financial advisor to discuss your situation. He is in the best position to help you make the choices best suited to your situation.