Q&A: Tax-free RRIF withdrawals

Zoomer | May 29th, 2007

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Question: I am assisting my parents through retirement planning
etc. My father is 65 years old and has heard that you can withdraw $2,000 annually
from a RRIF tax free. I have not heard such a thing but was hoping you could
clarify this for me. – R.T.

Gordon Pape answers: That’s almost correct. The reference
is to the “pension income amount.” It’s a tax credit on qualifying
pension income, up to a maximum of $2,000. RRIF payments to someone 65 or older
are eligible (for those under 65, certain conditions must be met).

This means your father can claim a credit of up to $2,000 at line 314 of the
federal tax return. If he is in the lowest tax bracket, the effect will be that
he has made a tax-free RRIF withdrawal for that amount. If he is in a higher
bracket, he benefits from a reduced tax rate.

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