Income Tax Strategies Essay

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What Pension Income Strategies are Available to Reduce Taxes to the Pensioner Table of Contents Executive Summary 4 Introduction 5 Types of Pension Plans Available to Canadians: 5 1. OAS (Old Age Security) 5 2. Supplemental: GIS (Guaranteed Income Supplement) and Allowance 6 ¬ GIS 6 ¬ Allowance 6 3. CPP (Canadian Pension Plan) 7 4. Retiring Allowance (severance pay) 7 5. Annuity Payments 8 ¬ Registered Retirement Income Funds (RRIF) 8 ¬ Registered Pension Plans (RPP) 8 ¬ Registered Retirement Savings Plans (RRSP) 9 Pension Tax Reduction Strategies 9 Dividing 9 1. Type: Pension Income Splitting 9 a. Benefits 9 b. Disadvantages 9 ¬ Example Table #1 9 2. Type: CPP Income Splitting 10 a. Benefits 10 b. Disadvantages 10 Disguising 10 3. Type: Tax Free Savings Account (TFSA) 10 a. Benefits 10 b. Disadvantages 11 ¬ Example Table #2 11 Deferring 11 4. Type: Transfer to RRSP or RPP 11 a. Benefits 11 b. Disadvantages 11 Deductions 12 5. Type: Contribute to a RRSP 12 a. Benefits 12 b. Disadvantages 12 Conclusion: 12 Reference 13 Appendix 14 Quantitative Examples: 14 Table#1: Pension Income splitting – before and after 14 Table #2: TFSA versus GIC outside of a TFSA 15 Table #3: Compounding interest in an RRSP 16 Executive Summary This report will research the different taxation strategies for pensioners receiving pension income and the different pension income sources that are available. This report is important because the majority of Canadians are planning on retirement – before or after age 65. Retirement plans need to be executed early to ensure they have built up the reserve
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