Many retirees forgo part-time work for fear of high taxes. However, some people should think about it.
A large number of retirees do not hesitate to return to the labor market, regardless of their tax situation. Because they are bored or like being with other people for a few hours a week. Many people have no choice: they have to make ends meet!
Others are reluctant. You have worked hard and want to enjoy life! Many people are afraid of the tax office. Do they have all the information to cut themselves off from an income that could make a big difference?
Especially since many retirees have experience: employers value them because they deliver the goods, working hours are avoided by younger people and their white hair calms customers.
Why not take advantage of it? Because the tax rate in Quebec is progressive. The impact is less than one would expect in retirement, although additional income can sometimes lead to a change in tax bracket. When it comes to taxes, every situation is unique!
Do your calculations
In Quebec, the first $5,000 earned is tax-free. Up to $10,000, only half is taxed.
Additionally, some retirees benefit from the Career Extension Tax Credit, which allows you to receive a maximum credit of $1,500 if you are between 60 and 65 and $1,650 for those over 65.
As you can imagine, this loan is aimed primarily at low-income retirees. In addition, the guaranteed income supplement will no longer be reduced if you declare employment income of up to $5,000. However, beyond that threshold, the amount decreases by 25 to 75 cents per dollar earned, depending on the person’s income.
In addition, an employee aged 65 years and older may stop paying contributions to the Quebec Pension Plan (QPP) and the Old Age Insurance Pension (PSV), provided that he receives the QPP old age pension or the PSV old age pension. After the age of 72, the contributions end.
Finally, retirees benefit from a one percentage point reduction for the first two tax brackets, an annual savings that can be up to $814 depending on the person’s income.
Therefore, before making a decision, you need to do your calculations.
Advice
• Consult an advisor or financial planner to determine your tax flexibility, or use the online tools SimulR (bit.ly/45AwHsy) and SimulRetraite (bit.ly/45xrXUw).
• What is the benefit of continuing to work and benefiting from the Career Extension Tax Credit? It allows you to maintain your lifestyle and postpone your retirement. If you claim your QPP and PSV benefits at age 70 instead of age 65, you will increase them by 0.7% per month. At the end of the year, for every dollar you earn, you’ll have 42 cents more in your pocket.
• Low-income retirees (who rely solely on QPP and PSV) are particularly at an advantage if they work part-time after retirement. This means they can get up to 80% of their gross income back if they choose not to contribute to the QPP.