What is the Age Amount?

The Age Amount is a non-refundable tax credit found on Line 301 of Schedule 1 of the federal tax return (provincial amounts may vary).

The federal amount is $6,913 in 2014 and is phased out when net income on Line 236 exceeds $34,873, by 15% for every dollar over this. If your income exceeds $80,980, your age amount will be zero. Your tax software will automatically calculate this for you.

Example: Rupert is 66. His net income in 2014 was $65,000. His federal age amount will be: $6,913 – [($65,000 – $34,873) x 15%] = $2,393.95. In real dollar terms, this saves him $371.35, assuming he lives in Ontario (where his provincial age amount was only $242.90 because his income is so high).

Age Amount Transfers. If you have a spouse who has a low income, you’ll be able to transfer the Age Amount to your return, doubling up your tax benefits. Your tax software will do this for you automatically on Schedule 2 and Line 326. That could save you over $1,000.

Why do you need to know this? You’re often in control of the timing of new taxable income sources. If, for example, your income is largely comprised of dividends from your small business corporation, remember they will be “grossed up” for tax purposes, and this gross up will increase your net income, the number used to determine the amount of both your Age Credit and the OAS you get to keep. You may wish to plan to earn interest or capital gains from your investments, instead.

Example: Helen is 68. If she earned $50,000 in interest income in 2014 (in addition to $6,645 OAS and $10,890 CPP) her net income would be $67,535 so her federal Age Amount would be $6,913 – [($67,535 – $34,873) x 15%] = $2,013.70.

If, instead of the interest, she earned $50,000 in dividends from public corporations, her net income would be $86,535 (it’s much higher because the $50,000 is grossed up by 38% to $69,000). She would not qualify for an Age Amount now and her taxes would rise by $8,787.75, mostly because she is now in the clawback zone for Old Age Security.

Clawbacks. Some of your OAS must be returned via the tax return if net income is over $71,592. If you receive a full year of OAS, it is completely repayable when net income reaches about $115,700. You’ll want to manage your income levels, if you can, to avoid the clawback zone.