Helping Seniors: Understanding GIS ClawbacksPosted: May 08, 2018 By: Evelyn Jacks
Posted in: Strategic Thinking, Financial Literacy, tax credits, knowledge bureau, Evelyn Jacks, guaranteed income supplement, old age security, clawbacks, income splitting, financial education, CE summits, Knowledge Journal, tax efficient income, claiming benefits, financial workships
Exactly when can a claim be made for Guaranteed Income Supplements (GIS)? Many seniors who qualify for Old Age Security may, in fact, be able to make a further claim for the GIS. But there is some income testing to be aware of. Astute tax and financial advisors can help, thereby providing invaluable advice.
GIS/Allowance maximum payments, shown below, are clawed back starting with the first dollar of income (excluding the first $3,500 of net employment income and Old Age Security).
|Benefits Eliminated When Income Exceeds|
|Married to a Non Pensioner||$10,423.56||$876.23||$880.61||$42,864 (combined)|
|Married to a Pensioner||$6,274.83||$527.48||$530.12||$23,616 (combined)|
|Spouse of Allowance Recipient||$6,274.83||$527.48||$530.12||$42,864 (combined)|
|Regular Allowance||$13,253.70||$1,114.14||$1,119.72||$33,072 (combined)|
|Survivor's Allowance||$15,798.69||$1,328.08||$1,334.72||$24,072 (single)|
Source: Knowledge Bureau’s Advanced Tax Desktop Journal.
What should be done? First, people with lower incomes should apply for the GIS as soon as they apply for their OAS. It’s possible to receive a retroactive payment, but only for a maximum of 11-months from the date of the application. If incomes are below the clawback thresholds, a claim is possible.
How is income defined? Check out the 2017 tax return for this information:
- Net employment income, after deductions, including amounts on Line 104 of the T1 return, and net of CPP/QPP contributions and EI premiums
- Employment Insurance and any Worker’s Compensation benefits
- CPP/QPP benefits (but not death or child benefits)
- Other pensions from Canadian and foreign sources including superannuation, Life Income Funds and RRIFs, annuity payments, alimony and maintenance payments, and disability benefits from an insurance plan
- Interest and other investment income reported on Schedule 4 of the T1 return
- Taxable Canadian dividends and capital gains
- Net rental income and net self-employment income, less the deduction for CPP/QPP contributions and any EI premiums
- Other income including net partnership income, support payments, RRSP income and other income on Line 130 of the T1 return, less deductions leading to net income
The net amount of any spouse’s allowance and guaranteed income supplement that you received in the tax year is shown in box 21 of your T4A(OAS) slip. These amounts are not taxable, but you must include them in your net income to ensure any benefits that you may be entitled to are calculated properly.
Because these benefits are included in net Income, they may, therefore, affect the Goods and Services Tax/Harmonized Sales Tax Credit, the Canada Child Benefit, as well as certain provincial or territorial tax credits and certain non-refundable tax credits.
Who typically misses claiming the GIS? Often widows/widowers with low income in the year of their spouse’s death will miss applying for the GIS. The following year, income is typically higher. That makes this an important catch even for higher-income families. Where the widow does not need the GIS, the funds could be donated to do good for others and the resulting donation credit can then be used to reduce the widow’s taxes in the following year when their income is higher as they being to receive pensions as a result of their spouse’s death.
Additional educational resources: Become better educated to help retirees by taking Knowledge Bureau’s Tax-Efficient Retirement Income Planning certificate course, a component of the MFA – Retirement and Estate Services Specialist Designation.
Also, get your copy of The Knowledge Journal that outlines this essential tax tip and more, with a line-by-line tax update for 2018 personal income tax filing. Be sure to join Evelyn Jacks at the Spring CE Summits tour in four Canadian cities this May and June, focusing on post-budget action strategies, and discussions on the implications of Canada and U.S. tax reforms. A copy of the Knowledge Journal is provided to attendees. Early-bird registration ends May 15!
Evelyn Jacks is President of Knowledge Bureau. She recently released a new book entitled Essential Tax Facts: How to Make the Right Tax Moves and Be Audit-Proof, Too available now!
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Evelyn Jacks is President of Knowledge Bureau, Canada's leading educator in the tax and financial services, and author of 53 books on family tax preparation and planning.