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    Categories: Retirement

Annuity Tax Schedule

From time to time, we are asked to explain how annuity taxation works and, in particular, how annuity taxation works for registered annuities.

Case study:

Single Annuity, Male, Age 62, RRSP, $150,000, Guarantee Period of 10 years. Purchase date May 1, 2012, Start Date June 1, 2012

This man pays income tax on the complete payment he receives. Remember he has tax sheltered this money by deducting it from his taxable income . Now the government wants its income tax on that capital as well as on the interest or gain earned.

To better illustrate how this annuity taxation works, I am setting out an annuity tax schedule.

PDF Illustration: Annuity Tax Schedule for Registered Funds

You will see that the client is investing $150k in registered funds with a minimum 10 year guarantee. Then if you look at the annuity tax schedule, you will see that the monthly amount is fully taxable each year.

Annuity taxation for non registered funds shows that there is no incomeĀ  tax on capital invested, only on the gain.

PDF Illustration: Annuity Tax Schedule for Non-Registered Funds

Posted by: Phil Barker: Phil is a leading expert in life annuities in Canada. His website Life Annuities.com is a recognized authority on annuities. Recently, he's been redefining how annuities are sold in Canada.