17 November 1995 External T.I. 9529525 - MAXIMUM 1994 SASK INCOME OF PENSIONER WITH NO TAX

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

Principal Issues:

maximum level of income without attracting tax

Position:

based on a given set of assumptions, for 1994 is 10,938

Reasons:

age, personal & pension tax credits offset tax on income

		952952
XXXXXXXXXX	A. Humenuk

November 17, 1995

Dear XXXXXXXXXX:

Re: Enquiry from XXXXXXXXXX

We are replying to your request of November 9, 1995 for information concerning the maximum amount of income which can be earned by a senior citizen without attracting any income tax.

As discussed in our telephone conversation of November 14, 1995 (XXXXXXXXXX/Humenuk), it is not possible to provide a single numerical level of income which represents the maximum amount of income at which no tax is payable for all individuals or even for the group of individuals described in XXXXXXXXXX letter. The level of federal and provincial tax payable by an individual varies depending on the amount of income earned and on tax deductions and credits which may be available to that individual. For example, the amount of tax payable can be reduced by tax credits for dependents, medical expenses or charitable donations as well as by the tax credit targeted for individuals who are severely disabled. The best advice which can be given to an individual seeking such information is to contact the nearest tax services office to ensure that no tax deduction or credit has been missed by that individual in calculating his or her tax payable.

As requested, we have attached a sample tax calculation which reflects the highest level of income which can be earned in Saskatchewan by a single individual in 1994 without attracting any income tax based on the assumption that the individual:

- has no dependents,

- has not made any charitable donations,

- has not paid any medical expenses and

- does not qualify for the disability tax credit.

Furthermore, this example assumes that there are no other tax credits available to the individual. Recognizing that these assumptions may not be particularly representative of the average senior citizen living on a fixed income, the level of income which can be earned by a particular individual without attracting tax may well be higher. For example, in her letter XXXXXXXXXX mentions that she is politically active in her community. The availability of a political contribution tax credit would increase the level of income which an individual could earn without attracting tax.

Another assumption that has been used in our example is that the additional pension income received by the individual qualifies for the pension tax credit. However, while most types of pension, including annuity payments, do qualify for the pension tax credit, neither the Old Age Security pension nor payments out of the Canada Pension Plan qualify for this tax credit.

You will note that the individual in our example is also entitled to a GST tax credit of $304 in respect of the 1994 taxation year (payable in July and October of 1995 and in January and April of 1996). This credit is intended to compensate individuals with a low income for some of the GST paid on their purchases.

While the example given reflects a level at which no tax is payable in a particular set of circumstances, it is significant to note that the effective rate of tax payable increases as an individual's net income exceeds $25,921. This is because the actual rate of federal tax increases to 26% for income in excess of $27,500 and certain of the tax credits, such as the age tax credit and the GST tax credit, are reduced by a specified percentage of income in excess of $25,921. In addition, some portion of the old age security pension will be repayable if the individual's total income, including otherwise non-taxable income supplements, exceeds $53,215.

We have enclosed a copy of the pamphlets "When You Retire", "Index to Revenue Canada Services" and the T1 General Guide for Individuals in Saskatchewan. If you have any further questions, please contact Annemarie Humenuk at 957-2134.

We trust our comments will be of assistance to you in replying to your constituent.

Yours truly,

P.D. Fuoco
for Director
Business and General Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
Enclosure