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Question about pension and Locked in Funds transfer option

  • Last Updated:
  • Feb 15th, 2018 9:35 am
[OP]
Member
Jan 14, 2012
391 posts
102 upvotes
Oshawa

Question about pension and Locked in Funds transfer option

Hi there I left my job and have a DB Pension. Only a few years i worked there. I am transfering part of the pension into a LIRA. The other part I will take as cash. They are charging a 30% TAX on that cash. Lets say im eligible for 10 000, so I will only get 7000. Is that 7000 that gets deposited also taxed and/or added to my income when I do my taxes at the end of the year? Thank you.
2 replies
Deal Addict
User avatar
Feb 1, 2012
1597 posts
2369 upvotes
Thunder Bay, ON
The $10,000 is taxable at your marginal rate for other income. You should get a t-slip for that amount. The $3000 is a withholding tax on the $10,000. Consider it like a down payment on the tax you will owe on the $10,000.

Then when you file your taxes you will add $10k to your income and add $3k to your taxes already paid. So to answer your question, no the $7k is not taxed again.

You can see marginal tax rates at taxtips.ca. https://www.taxtips.ca/marginaltaxrates.htm Use the column for Other Income for whatever province you are in. If your marginal tax rate (MTR) is higher than the 30% that was deducted you will owe more tax on the $10k when you file your taxes. If your MTR is less than 30% you will owe less, and could get a refund depending on the rest of your tax situation.
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[OP]
Member
Jan 14, 2012
391 posts
102 upvotes
Oshawa
Deepwater wrote: The $10,000 is taxable at your marginal rate for other income. You should get a t-slip for that amount. The $3000 is a withholding tax on the $10,000. Consider it like a down payment on the tax you will owe on the $10,000.

Then when you file your taxes you will add $10k to your income and add $3k to your taxes already paid. So to answer your question, no the $7k is not taxed again.

You can see marginal tax rates at taxtips.ca. https://www.taxtips.ca/marginaltaxrates.htm Use the column for Other Income for whatever province you are in. If your marginal tax rate (MTR) is higher than the 30% that was deducted you will owe more tax on the $10k when you file your taxes. If your MTR is less than 30% you will owe less, and could get a refund depending on the rest of your tax situation.
Wonderful explanation. Thank you.

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