Updated Checked by the Tax-Services.ca editorial team How we check
Pension tax in Canada depends on the kind of pension. A workplace pension, RRIF payments and RRSP withdrawals are taxed as income. CPP and OAS are also taxed, but they don’t qualify for the pension income credit. On $50,500 of mixed retirement income in Ontario, our calculator shows about $5,777 of tax.
What kinds of pension income are taxed?
All of it counts as income on your return. The difference is in the credit you can claim. The federal pension income amount is up to $2,000, and the CRA says the following don’t count for it: Old Age Security, CPP and QPP benefits. The CRA’s page on the pension income amount has the full list.
For people 65 and over, eligible income for the credit includes lifetime benefits from a registered pension plan and RRIF income. Under 65 the rules are tighter, and most sources only qualify after a spouse has died. A workplace pension paid for life is the main exception.
What’s that credit worth? At the federal lowest rate of 14% in 2026, a full $2,000 amount cuts your federal tax by up to $280. Not life-changing, but it’s a few hundred bucks you’d leave on the table by forgetting to claim it.
How much tax will you pay on your pension?
We tested two profiles in the retirement income tax calculator. Both are 67 and live in Ontario. Each has $12,000 of CPP and $8,800 of OAS a year, and $20,000 from an employer pension.
| Extra RRIF withdrawals | Income before tax | Total tax | Left after tax |
|---|---|---|---|
| $0 | $40,800 | $3,694 | $37,105.94 |
| $20,000 | $60,800 | $8,387 | $52,412.94 |
The extra $20,000 of RRIF income cost $4,693 in tax, which is 23.5 cents on each dollar. So a withdrawal you don’t need can cost more than you’d guess, especially when it pushes your income into a higher bracket and, for people with bigger pensions, toward the point where OAS starts to be taken back.
Think before you draw. Ask what the money is for, and whether you could take it over two years instead of one.
Does pension income get clawed back?
OAS can. Once your income passes a yearly threshold, you repay 15 cents of OAS for every dollar over it. At $124,000 of income, for a 70-year-old with $60,000 of pension and $40,000 of RRIF withdrawals, the calculator shows $4,301.55 of OAS recovery tax on top of ordinary tax. Its total was $32,493.
The threshold moves every year, and the CRA’s pages show different figures for payments from July 2026 depending on which income year they use. We couldn’t pin down one number we’d trust you to file with, so look at the CRA’s OAS recovery tax page for the current figure. To see what a full OAS pension pays, use the OAS calculator.
Can a couple split pension income?
Often, yes. You can move up to half of your eligible pension income onto your spouse or common-law partner’s return, using form T1032, which you both sign every year. The one who gives it up deducts it, and the other adds it. It helps when one partner is in a much higher bracket.
Our calculator leaves splitting out, so its results for a couple with uneven incomes will be high. Compare the result with the income tax calculator for each person and see what the split would do.
Which slips should you expect?
Each source of pension income comes with its own slip, so a retiree can end up with four or five pieces of paper. CPP shows up on a T4A(P), OAS on a T4A(OAS), an employer pension on a T4A, and RRIF payments on a T4RIF. Missing one is the easiest way to get a reassessment letter later, so tick them off against your CRA account before you file.
Where people lose money on pension tax
The big one is too little tax taken off. Withholding on pension payments is an advance, and if it falls short you owe the rest when you file. If that’s you, the tax instalments calculator shows what to pay during the year. Many retirees are surprised the first spring after retiring, because a paycheque used to cover all of this automatically.
Next is RRIF withdrawals above the minimum, as the table shows. Take what you need, not what the bank suggests. Last, the provincial credits. Our retirement calculator includes the federal age amount and the $2,000 pension amount, but not the provincial ones, so your real provincial tax may be a little lower.
How we checked the figures
The pension income amount and its list of eligible income come from the Canada Revenue Agency‘s page on the pension income amount. The splitting rules come from its page on the elected split-pension amount. Tax results are from our own calculator, using 2026 rates, federal and Ontario. The OAS recovery rate of 15% comes from the Government of Canada’s OAS pages.
Frequently asked questions
Is pension income taxable in Canada?
Yes. Workplace pensions, RRIF payments, RRSP withdrawals, CPP and OAS all count as income on your return.
What is the pension income amount?
It is a federal credit on up to $2,000 of eligible pension income. CPP, QPP and OAS don't qualify for it.
Can I split my pension with my spouse?
Often, yes. You can move up to half of eligible pension income to your spouse or common-law partner using form T1032.
What is the OAS clawback?
It is a recovery tax of 15% of the income above a yearly threshold. Check the current threshold on the CRA page.
Why did I owe tax on my pension when I filed?
Tax withheld from pension payments is an advance. If it falls short of your real tax, you owe the rest when you file, or you can pay instalments.
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