How retirement income is taxed

In retirement, income usually comes from several places at once: government pensions, a workplace pension, a RRIF, savings and investments. Most of it is taxable, but tax isn’t always taken off before you’re paid, and as the CRA points out, that can leave you owing tax when you file. Here’s how each source is treated, and how to keep the tax paid during the year in step with what you’ll owe.

CPP and QPP

Canada Pension Plan and Quebec Pension Plan benefits are taxable. You get a T4A(P) slip each year and report the total on your return.

Tax isn’t deducted from CPP unless you ask for it. You can set up or change deductions in My Service Canada Account, by sending Service Canada form ISP3520CPP, or by calling Service Canada. For QPP, the CRA says to contact Retraite Québec.

If you receive a lump-sum CPP or QPP payment and part of it is for earlier years, you report the whole amount in the year you receive it. If $300 or more relates to earlier years, the CRA will work out the tax as if you’d received those parts in those years, if that’s better for you.

CPP and QPP benefits don’t count as eligible pension income, so they don’t qualify for the pension income amount and can’t be split with your spouse on your returns. Couples can, however, apply to share CPP retirement pensions through Service Canada; see pension income splitting. For timing, see when to start CPP and OAS.

Old Age Security and the GIS

Old Age Security (OAS) is taxable and comes with a T4A(OAS) slip. As with CPP, no tax is deducted unless you ask Service Canada: send it form ISP3520OAS.

If your net income for 2025 is above $93,454, you have to repay part or all of your OAS pension through the recovery tax: 15% of the amount above that threshold. See the OAS clawback.

The Guaranteed Income Supplement (GIS) is reported as income too, from box 21 of the T4A(OAS) slip. If your net income before adjustments is at or below a yearly limit, you then claim a deduction for the same amount, so it doesn’t add to your taxable income. Above that limit, the deduction is worked out differently.

Workplace pensions

Payments from an employer’s pension plan are taxable and are usually reported on a T4A slip (sometimes a T3). Tax is deducted from them, but if you have pension income from more than one source, the CRA notes that the tax withheld may not be enough to cover what you owe. You can send your pension plan administrator a Form TD1 to have more deducted.

A lifetime pension from a registered pension plan is eligible pension income at any age. It qualifies for the pension income amount and for pension income splitting with your spouse or partner. See workplace pension plans.

RRIFs and life income funds

Earnings inside a RRIF aren’t taxed, but everything paid out is taxable in the year you receive it. Life income funds (LIFs), which are locked-in RRIFs, are taxed the same way.

No tax is withheld from the minimum amount you must take each year. Tax is withheld from anything you take above it, at the lump-sum withholding rates. The payer uses one rate, picked by adding up all the amounts above the minimum it has paid or expects to pay you in the year: 10% if they total $5,000 or less, 20% if they total more than that up to $15,000, and 30% if they total more than $15,000. In Quebec, lower federal rates apply and Quebec tax is withheld as well. Withholding is only a prepayment: the whole payment is income on your return, and the CRA notes you may have to pay more tax on it when you file.

If you’re 65 or older at the end of the year, RRIF payments count as eligible pension income for the pension income amount and splitting. If you’re younger, they count only if you received them because your spouse or partner died. Amounts transferred from a RRIF to an RRSP, another RRIF or an annuity don’t count. See converting your RRSP to a RRIF, and try our RRSP and RRIF withdrawals calculator.

Annuities

An annuity makes payments to you on a regular basis, and the payments are part of your income. For example, if you draw an annuity from your RRSP, you include the payments in your income.

For a general annuity, your T5 slip shows the earnings part of the payments in box 19, and that’s the amount you report. If you were 65 or older at the end of the year (or received the payments because your spouse or partner died), you report it as pension income, which qualifies for the pension income amount. Otherwise you report it as investment income.

TFSA withdrawals

Money you take out of a tax-free savings account, including the investment income earned inside it, is generally not taxed. TFSA income and withdrawals also don’t affect OAS or the GIS. You can re-contribute what you withdrew starting the next calendar year, or sooner if you have unused contribution room. See TFSA basics.

Investments outside registered plans

Interest, dividends and capital gains on investments held outside a registered plan are taxed each in its own way; see how investments are taxed. Income tax can’t be withheld from investment income, rental income or capital gains, so this kind of income can mean paying by instalments (below).

Avoiding a bill: withholding and instalments

If too little tax comes off at source, you may have to pay tax by instalments. You may have to pay them for 2026 if your net tax owing is more than $3,000 ($1,800 in Quebec) for 2026 and was also more than that in either 2025 or 2024. Instalments are due March 15, June 15, September 15 and December 15. See paying tax by instalments.

You can reduce or avoid instalments by having more tax withheld:

• OAS: form ISP3520OAS, sent to Service Canada.
• CPP: form ISP3520CPP, sent to Service Canada, or My Service Canada Account.
• QPP: Retraite Québec.
• An employer pension: Form TD1, sent to your pension plan administrator.

In the CRA’s own example, someone with pension income whose net tax owing is a few thousand dollars every year uses Form TD1 to ask their pension plan administrator to withhold an extra amount each month, which brings their expected net tax owing under the instalment threshold.

Credits that lower the tax

• Age amount. If you’re 65 or older on December 31, you can claim the full $9,028 for 2025 if your net income is $45,522 or less. Above that it shrinks, and it’s gone at higher incomes.
• Pension income amount. Up to $2,000 of eligible pension income. OAS, CPP and QPP don’t count.
• Pension income splitting lets couples jointly elect to move up to half of one partner’s eligible pension income to the other’s return; see pension income splitting.

If your spouse or partner doesn’t need all of their age amount or pension income amount to bring their federal tax to zero, you may be able to claim the unused part. Our overview of tax for seniors and retirees covers these credits and others.

In Quebec

You also file a Quebec return with Revenu Québec each year. For tax deductions from QPP benefits, contact Retraite Québec rather than Service Canada.

What to do

1. List each source of income for the year and whether tax is withheld from it.
2. Ask Service Canada to deduct tax from CPP and OAS, and review the tax deducted from your pension. Remember that nothing is withheld from your RRIF minimum.
3. Keep an eye out for instalment reminders, and pay them or raise your withholding.
4. File every year, even if you owe nothing: the CRA uses your return to work out your benefit and credit payments, and they can stop if you don’t file.