Tax planning for seniors isn’t about “beating the system”. It’s about protecting your retirement income, reducing financial stress, and preserving more for your spouse and future generations. Canada’s tax system provides generous benefits for seniors, yet many people don’t take full advantage of them. By understanding and applying the right strategies, you can significantly improve your after‑tax income in retirement. Below, we’ll review several of the most effective tax strategies for seniors.

1. Pension Income Splitting (One of the Best Tax Savers)

If you’re married or in a common-law relationship, you can split up to 50% of your eligible pension income with your spouse.

Why This Matters

- When one spouse has a higher income, it can push them into a higher marginal tax bracket.

- Pension income splitting can lower the higher earner’s tax bill, leading to tax savings as a couple.

- It can reduce or prevent Old Age Security (OAS) clawback.

- It may improve eligibility for income‑tested benefits and credits.

Income Sources That Can Be Split

- Defined benefit pension income.

- RRIF withdrawals (once age 65 or older).

- Certain annuity payments

For many couples, pension income splitting can be worth thousands of dollars per year in tax savings.

2. The Age Amount Tax Credit

Seniors aged 65 or older with lower net incomes may qualify for the federal age amount credit (up to $9,028 for 2025), which directly reduces the amount of tax payable.

For 2026, the full credit is generally available if income is below the mid‑$40,000 range, and it gradually phases out as income increases. Even when partially reduced, the credit can still meaningfully lower your tax bill.

Many seniors overlook how quickly this credit phases out, highlighting why thoughtful income planning is especially important.

3. Old Age Security (OAS) Clawback Planning

Old Age Security (OAS) begins to be clawed back once your net income exceeds a certain threshold (approximately the low $90,000 range, indexed annually). For every dollar above this limit, 15% is repaid until OAS is fully clawed back at incomes of roughly $150,000 or more.

Ways To Reduce OAS Clawback

- Pension income splitting.

- RRSP withdrawals earlier (before age 71).

- Using TFSA withdrawals instead of RRIF income.

- Deferring OAS in certain situations

This is an area where thoughtful planning can make a significant difference in your retirement income.

4. Using Your Tax-Free Savings Account (TFSA) Strategically

Your TFSA is one of the most powerful gifts the Canadian government offers investors, especially in retirement. Key benefits include:

- Growth is tax-free.

- Withdrawals are tax-free.

- TFSA withdrawals do not count as income and will not affect OAS or GIS.

If you don’t need all your RRIF withdrawals for day‑to‑day expenses, consider moving excess funds into your TFSA (if you have contribution room) and investing there for long‑term, tax‑free growth. We often see seniors underuse this valuable planning tool, leaving meaningful tax savings on the table.

5. Registered Retirement Income Fund (RRIF) Withdrawals – Planning the Timing

At 71, your RRSP converts to a RRIF, and mandatory withdrawals begin. It’s important to remember that the minimum withdrawal percentage increases each year. Large RRIF balances can also push you into higher tax brackets and may trigger OAS clawback.

For this reason, we often encourage modest RRSP withdrawals in your 60s, before CPP and OAS begin. Spreading withdrawals over time can help smooth taxable income, reduce lifetime taxes, and create a more efficient retirement income plan.

6. Medical Expense Tax Credit

Don’t overlook medical expenses that provide tax relief. You may be able to claim costs such as:

- Prescription drugs

- Dental work

- Vision care

- Hearing aids

- Travel for medical treatment

- Long-term care costs

Be sure to keep your receipts. This credit is especially valuable in years with higher‑than‑normal health‑care costs, and it can meaningfully reduce your tax bill.

7. Home Accessibility Tax Credit

If you renovate your home for mobility or safety (grab bars, walk-in tub, ramps, stair lifts), you may claim up to $20,000 in eligible expenses. Designed for seniors 65+ or persons with disabilities.

This can reduce your tax payable significantly. Don’t forget the Disability Tax Credit (if applicable). If you or your spouse qualifies medically, the Disability Tax Credit (DTC) reduces tax payable, which can open eligibility to other programs. Many seniors qualify but never apply.

8. Charitable Donations – Plan Them Wisely

If you’re charitably inclined, there are ways to give more tax‑efficiently:

- Donations over $200 qualify for a higher federal tax credit.

- Consider donating publicly traded securities with significant capital gains instead of cash—no capital gains tax is payable on donated securities.

- Bunch donations into a single year to maximize the tax credit impact.

The focus is on giving in a smarter, more tax‑efficient way, not just giving more.

I’ll stress this again: tax planning for seniors isn’t about “beating the system.” It’s about protecting your retirement income, reducing financial stress, and preserving more for your spouse and future generations.

The biggest mistake I see seniors make is waiting too long to plan. Even small adjustments, such as income splitting, strategic TFSA use, or earlier RRSP withdrawals, can make a meaningful difference over 10 to 20 years.

If you’d like a second opinion on your current income tax planning, please contact our office at 780‑414‑2552. After decades of hard work, you deserve peace of mind.

Information in this article is from sources believed to be reliable; however, we cannot represent that it is accurate or complete. It is provided as a general source of information and should not be considered personal investment advice or solicitation to buy or sell securities. Raymond James advisors are not tax advisors, and we recommend that clients seek independent advice from a professional advisor on tax-related matters. The views are Information in this article is from sources believed to be reliable; however, we cannot represent that it is accurate or complete. It is provided as a general source of information and should not be considered personal investment advice or solicitation to buy or sell securities. The views are those of the author, Trixie Rowein, and not necessarily those of Raymond James Ltd. Investors considering any investment should consult with their Investment Advisor to ensure that it is suitable for the investor’s circumstances and risk tolerance before making any investment decision. Raymond James Ltd. is a Member of the Canadian Investor Protection Fund. Raymond James Ltd. is a Member of the Canadian Investor Protection Fund.

About the Author

Trixie Rowein is known for her work ethic and commitment to the community and clients. She started her career at Raymond James in 2000 as a financial advisor and has been empowering and guiding clients to make smart decisions for 25 years. She and her team specialize in advising clients going through a transition, including retirement, loss of a spouse through death or divorce and transitioning wealth to the next generation. Growing up in Edmonton in an immigrant family, she saw firsthand how smart financial planning could transform lives.

As a lifelong learner, she has earned several designations, including the Certified Professional Consultant on Aging (CPCA) designation, as serving our aging population matters to her. She values education - writing a weekly e-newsletter, in addition to hosting regular seminars and speaking to high school and UofA students. Trixie is on the Board of Directors of Little Warriors charitable organization, and part of the Raymond James Canada Foundation (RJCF) Advisory Committee. She and her husband Ian enjoy travelling, gardening and spending time out at their acreage. Trixie has two daughters and is fluent in Spanish.

Tax Tips for Seniors