Retirement income: how CPP, OAS and RRIF payments are taxed

Three payments, three slips

Each source reports differently. CPP benefits come on a T4A(P) slip, and CRA says the total in box 20 goes on line 11400. OAS comes on a T4A(OAS) slip, where the taxable pension in box 18 goes on line 11300 and any tax deducted in box 22 goes on line 43700. RRIF payments come on a T4RIF slip and are reported on line 11500 if you were 65 or older on December 31 of the year or received them because your spouse or common-law partner died, and on line 13000 in other cases.

Seeing the three side by side matters because most retirees only notice the one that arrives with tax withheld. Before you estimate your tax, list every slip you expect and compare it with last year’s return. A missing slip is one of the most common reasons an expected refund becomes a balance owing.

CPP: timing changes the amount, not the tax treatment

The Canada Pension Plan retirement pension can start as early as age 60 and as late as age 70. Service Canada says payments decrease by 0.6 percent for each month before 65, to a maximum reduction of 36 percent at 60, and increase by 0.7 percent for each month after 65, to a maximum of 42 percent at 70. The amount you receive also depends on your contribution history, and Service Canada says its published maximum and average figures are not guaranteed.

Whatever the start date, the pension is taxable income. Service Canada says taxes are not automatically deducted from CPP and OAS. If you do not ask for monthly deductions, you may have to pay tax when you file. You can request federal deductions through My Service Canada Account or by mailing form ISP3520CPP. A lump-sum payment that includes earlier years is reported in full in the year you receive it, although CRA may calculate the tax as if you had received the earlier parts in those years when that helps you.

OAS: taxable, then possibly reduced

Old Age Security starts at 65 and can be deferred for up to five years. The amount rises by 10 percent from the month after your 75th birthday. Like CPP, it is taxable and has no automatic withholding.

OAS also has a recovery tax. If your net income is above the threshold, you repay 15 percent of the excess, up to the full amount of your OAS. CRA lists the threshold as $93,454 for 2025 income, which is applied from July 2026 to June 2027, and $95,323 for 2026 income, which is applied from July 2027 to June 2028. CRA’s table treats a current-year figure as an estimate until October and as final after that, so check the current page before relying on it.

As an illustration, suppose net income for 2026 is $105,000. The excess over $95,323 is $9,677, and 15 percent of that is $1,451.55 for the recovery period. The repayment is not taxable income. Service Canada deducts it monthly from your OAS, and you claim box 22 of the T4A(OAS) on line 43700. If your income has dropped, CRA says you can ask in writing to reduce the amount withheld by sending Form T1213(OAS).

RRIF: the minimum, the excess and the withholding

A RRIF pays a minimum amount every year, starting the year after you set it up. The carrier calculates it using your age at the start of the year, or your spouse’s or common-law partner’s age if you chose that on the original application. That choice cannot be changed later. You can withdraw more than the minimum but not less.

The withholding differs by amount. CRA guidance says no income tax is withheld from the minimum. Amounts above the minimum are withheld using lump-sum rates. CRA’s published rates for residents outside Quebec are 10 percent up to $5,000, 20 percent over $5,000 to $15,000, and 30 percent over $15,000. As an illustration, a $10,000 withdrawal above the minimum would have 20 percent, or $2,000, withheld.

Withholding is a deposit, not your final tax. CRA notes that tax withheld may not be enough for your tax bracket, and you may owe more when you file. A RRIF withdrawal also counts toward net income, which is the number that feeds the OAS recovery tax, so a large one-time withdrawal can have a second cost.

Why retirees still end up with a balance owing

The usual cause is stacked income with little or no tax deducted at source. A pension, CPP, OAS and a RRIF minimum can arrive in full, and the tax is calculated only when the return is filed. CRA’s instalment page lists certain pension payments among the income that may leave too little tax withheld.

CRA says you generally have to pay instalments for 2026 if your net tax owing is more than $3,000 and was also more than $3,000 in either 2025 or 2024. A retiree who owed tax two years in a row should check whether reminders are due, or whether it is simpler to request voluntary deductions on CPP and OAS instead. Our instalments article explains the calculation options.

Choices to discuss before you retire or convert

You can contribute to an RRSP until December 31 of the year you turn 71. CRA says that up to the end of that year you choose among options for the funds, including transferring them to a RRIF. A direct transfer to a RRIF is not taxed at the time, and the income is taxed as you receive payments. Before you convert, ask whether using a younger spouse’s age for the minimum suits your plan.

Pension income splitting can lower household tax, but it has limits. CRA excludes OAS and CPP from splitting; RRIF income qualifies when it is reported on line 11500 and was not transferred on. CRA also says splitting can affect credits and benefits that depend on one person’s net income, including the age amount and the OAS repayment. CPP has its own pension sharing for spouses, which Service Canada administers. Our guide on pension income splitting covers both.

If you still own a business

Owner-managers often retire in stages. If you keep working after you start CPP, Service Canada says you can choose to stop post-retirement contributions at 65, and they stop at 70 regardless. How you pay yourself in the years around retirement, between salary and dividends, changes both your CPP position and the net income that drives the OAS recovery tax.

A year when you sell the company, a building or investments may add a large gain to net income. Because the OAS recovery tax is based on net income, ask an accountant to project that year before you sign, not after. Our salary-versus-dividends guide covers the owner-manager choice.

What to bring to a retirement tax conversation

Bring your T4A(P), T4A(OAS) and T4RIF slips, last year’s notice of assessment, any pension slips, your RRIF statements showing the minimum and excess, and the letter showing any voluntary deductions you set up. If your income has changed, bring an estimate for the coming year.

Ask three questions: how much tax will be due in April, whether withholding or instalments should change, and whether any decision, such as a large RRIF withdrawal, will push net income past the OAS threshold. Sora’s personal tax service can help organize this, but it cannot replace a review of your own figures.