CPP Benefits & Tax Guide

Types of CPP Benefits

Retirement Pension

• Earliest: Age 60 (reduced)
• Standard: Age 65
• Maximum: Age 70 (increased)
• 2024 max at 65: ~$1,364/month
• Average payment: ~$760/month

Disability Benefits

• For contributors unable to work
• 2024 max: ~$1,606/month
• Includes flat-rate + earnings-related portion
• Converts to retirement at 65

Survivor Benefits

• For spouse/partner of deceased contributor
• Amount depends on age and circumstances
• Children's benefit also available

Post-Retirement Benefit

• If you work while receiving CPP
• Mandatory contributions until 65
• Optional 65-70
• Adds to pension amount

How CPP Is Taxed

Tax Treatment

• 100% of CPP benefits are taxable
• Added to your other income
• Taxed at your marginal rate
• No special tax credits

The T4A(P) Slip

You'll receive T4A(P) showing:

• Box 20: CPP benefits paid
• Box 22: Income tax deducted
• Box 14: Disability benefit
• Box 15: Survivor benefit

Tax Withholding

• Tax withheld at source if requested
• Request through Service Canada
• Set specific amount or percentage
• Otherwise, may owe at tax time

When to Start CPP

Starting Early (Age 60)

• Reduced by 0.6% per month before 65
• Maximum reduction: 36% at age 60
• More years of payments
• Lower tax if other income is low

Starting at 65

• Standard benefit amount
• Based on your contributions
• No reduction or increase

Delaying to 70

• Increased by 0.7% per month after 65
• Maximum increase: 42% at age 70
• Fewer years of payments
• Higher annual amounts

Break-Even Analysis

Comparing start at 60 vs 65:

• Break-even around age 74
• After 74, starting at 65 is better
• Consider health, other income, tax rates

CPP and OAS Interaction

OAS Clawback

• CPP counts toward OAS clawback threshold
• 2024 threshold: $90,997
• CPP + RRIF + work income adds up
• May push you over clawback limit

GIS Impact

• CPP reduces GIS entitlement
• Dollar-for-dollar reduction (mostly)
• If eligible for GIS, consider timing

CPP Pension Sharing

How Sharing Works

• Married/common-law couples
• Both must be 60+
• Split benefits earned during relationship
• Can reduce family tax

Tax Benefits

• Shifts income to lower-income spouse
• May reduce overall family tax
• Different from pension income splitting
• Apply through Service Canada

CPP Contributions

Employee Contributions

• 2024 rate: 5.95% on earnings
• Maximum pensionable earnings: $68,500
• Basic exemption: $3,500
• Max contribution: ~$3,867

CPP2 (Enhanced)

• Started 2024
• Additional 4% on earnings $68,500-$73,200
• Increases future benefits

Tax Treatment of Contributions

• Employee portion: Tax credit (Line 30800)
• Self-employed: Half is deduction, half is credit
• Reduces tax owed

Working While Receiving CPP

Ages 60-65

• Must continue contributing to CPP
• Contributions earn Post-Retirement Benefit
• PRB added annually to pension

Ages 65-70

• Contributions are optional
• Can elect to stop
• If contributing, earn PRB

After Age 70

• No more CPP contributions
• No more PRB earning

Reporting CPP on Your Return

Where to Report

• Line 11400: CPP retirement pension
• Line 11400: CPP disability (with code)
• Line 43700: Tax withheld

Pension Income Amount

• CPP does NOT qualify for pension income amount
• Must be private pension, RRIF, or annuity
• Age 65+ for pension income splitting

Tax Planning Strategies

Coordinate with RRSP/RRIF

• RRSP meltdown strategy
• Withdraw RRSP before CPP starts
• Reduce taxable income in CPP years

Income Splitting

• CPP sharing (both 60+)
• Pension splitting (age 65+) for other pensions
• TFSA for tax-free income