Tax season is here, and the race to file before the government deadline is well underway! As you get busy getting all your documents in order, you might be curious about how your pension plays into that. In this article, we’ll be sharing some important information about your pension and what you should keep in mind as you approach filing your taxes this season.

Tax information relevant to your pension can be broken down into two categories – tax savings as an active member and tax deductions as a retired member:

Tax savings on your contributions while you work

While you’re an active member of the CAAT Plan, you enjoy immediate tax-savings on your contributions. The pension contributions you make are deducted from your gross income, which lowers your overall taxable income for the year - so you end up paying less tax with no extra effort on your part. Because you enjoy these tax savings immediately, they are already accounted for on your T4 when it’s time to file your tax return.

Your pension adjustment is also reported on your T4. A pension adjustment reflects the value of the benefit you earned in the past year under the CAAT Plan. The amount is included in box 52 of your T4 slip. This doesn’t affect your reported income, but it reduces your Registered Retired Savings Plan (RRSP) deduction limit for the following year. That’s because you’ve contributed, and earned a retirement benefit, as a result of your participation in the CAAT Plan.

Tax deduction to your pension after you retire:

In retirement your pension income is taxable. This means that income tax is deducted from your gross monthly pension payments before it is deposited in your account.

Like you did with your working income, you are required to report your pension income when filing your taxes. And just like the T4 tax slip you previously got from your employer, CAAT will provide you with a T4A which you need to include when completing your taxes. This slip is mailed to you by our pension payroll agent - CIBC Mellon.

Income Splitting

As a retiree, you have the option to use “income splitting” if you have a spouse. Income splitting is done on your joint tax return: the spouse with the higher retirement earnings can allocate up to half of those earnings to the lower earning spouse. This spreads out the earnings and may lower the overall tax amount paid by the couple. Depending on your age and the age of your spouse, certain types of income will qualify for pension income splitting. Consult your financial advisor or accountant for more details on your eligibility and to determine if income splitting would be beneficial to you and your spouse.

If you have more questions about your CAAT pension, visit our Member page, contact us using secure messaging through your My Pension account or call us at 1-866-350-2228.