Over 65 with no pension? A $2,000 RRIF withdrawal before December 31 can still save you $280
CPP and OAS don't qualify for the federal pension income credit, but RRIF income does. Here's who can use the trick, the math on a real retiree, and the one case where it does nothing.
Most retirees assume the pension income amount is for people with a workplace pension. It isn't. If you're 65 or older, RRIF income qualifies too — and you can create it before the calendar year ends.
What the credit is
The federal pension income amount lets you claim a credit on up to $2,000 of eligible pension income. At the lowest federal rate of 14%, that's a $280 reduction in federal tax. Provinces add their own version, with different caps.
At 65 or older, eligible income includes:
- Lifetime pension benefits from a registered pension plan
- Regular annuity payments
- RRIF income and RRSP income received as periodic withdrawals
- Elected split pension income
What doesn't count: CPP, QPP and OAS. For many retirees those are the only "pension" income they have, which is why the credit goes unclaimed.
Amounts rolled from a RRIF into another RRSP, RRIF or annuity don't qualify. It has to be real income you receive and report.
The math on one retiree
Take an Ontario retiree aged 66 with $15,000 of CPP, $8,700 of OAS and $12,000 of taxable interest — about $35,700 of income. Using the Metrestick retirement income calculator:
- With all $12,000 as interest: federal tax of $1,519.
- With $2,000 of that income coming from a RRIF and $10,000 from interest: federal tax of $1,239.
Same total income, $280 less federal tax. Nothing about the withdrawal changes what you earn — it just changes what label the income wears.
How to set it up
- Check your age. The rule works at 65 or older. Under 65, RRIF and RRSP income mostly doesn't qualify.
- Open a RRIF if you don't have one. A first-year RRIF has no required minimum, so you can withdraw as little as $2,000.
- Withdraw before December 31. The income lands on your 2026 return only if it's paid in 2026. Check how your institution handles taxes withheld at source on small amounts.
- Claim it on line 31400 when you file, along with the provincial equivalent.
Spouses should check this for each person: it's a per-person credit.
When it does nothing
The credit is non-refundable — it only reduces tax you'd otherwise owe. Run the same retiree with only CPP, OAS and a $2,000 RRIF withdrawal and the federal tax bill is already $0, so there's nothing for the credit to cancel. If your income is that low, you may also be in range for the GIS, and extra taxable income reduces it — so withdrawing could cost you more than it saves.
The trick works best for retirees with enough taxable income to owe federal tax, and who are nowhere near OAS clawback territory.
The takeaway
If you're 65 or older, owe federal tax, and have an RRSP or RRIF sitting untouched, a $2,000 withdrawal before December 31 is worth about $280 federally, plus the provincial credit. Confirm the provincial cap for your province, and run your own numbers before you move money.
Figures: Metrestick (metrestick.ca) retirement income calculator, 2026 CRA tax parameters; eligibility per the CRA's line 31400 guidance. This is general information, not tax advice.