The age amount, and why it shrinks as income rises

From the year you turn 65, a new line appears on the federal return: the age amount, line 30100. For 2026 it is worth up to $9,208, which at the lowest federal rate cuts tax by up to $1,289. But it is not a flat credit. Once net income passes $46,432 it begins to shrink, by fifteen cents for every dollar above that line, until it disappears.

That design has a side effect few people notice: in the income range where the amount is shrinking, each extra dollar of income is taxed a little more heavily than the bracket tables suggest. This sheet works through the numbers.

What the age amount is

The age amount is a non-refundable federal credit for anyone who was 65 or older on 31 December of the tax year. Like other non-refundable credits, it reduces tax payable but cannot create a refund by itself. Provinces and territories have their own age amounts with their own figures and income tests, which add to the federal effect described here.

The 2026 figures

The working: three incomes

Three illustrative retirees, each 65 or over, with different net incomes:

Between the first and third columns, net income rose by $45,000 and the federal value of the age amount fell by about $810. That loss is on top of the ordinary income tax on the extra income.

The hidden marginal rate

Inside the band from $46,432 to about $107,819, each extra dollar of net income reduces the age amount by 15 cents. At a 14% credit rate that is 2.1 cents of extra federal tax per dollar. So a retiree whose income sits in that band pays roughly 2.1 percentage points more on each additional dollar than the federal bracket rate alone implies: about 16.1% instead of 14% in the first bracket, and about 22.6% instead of 20.5% once taxable income passes $58,523. Provincial age amounts that also shrink with income add their own layer.

Two points or so is not dramatic, but it is permanent for as long as income stays in the band, and it applies to every taxable source: RRIF withdrawals, CPP, OAS, workplace pensions, interest, and the taxable part of capital gains.

Timing shows the effect clearly. Take an illustrative retiree with $45,000 of net income who needs $20,000 from a RRIF. Taken in one year, net income becomes $65,000: the age amount falls by $2,785.20, costing $389.93 of federal tax, and $6,477 of the withdrawal also lands in the 20.5% bracket. Spread as $5,000 a year over four years, net income is $50,000 each year: the age amount falls by $535.20 a year, costing $74.93 a year or $299.71 in total, and nothing reaches the second bracket. On these figures the lump sum costs about $90 more through the age amount alone, and about $421 more again through the bracket.

When it overlaps the OAS recovery

The band runs past another line: the OAS recovery threshold, $95,323 for 2026 income. Between $95,323 and the point where the age amount reaches zero, an extra dollar of net income triggers both reductions: 15 cents of OAS repaid (collected the following July to June) and 15 cents off the age amount. A large one-off RRIF withdrawal or a capital gain in a single year can therefore cost noticeably more than its bracket rate. This is one of the reasons TFSA withdrawals, which are not income, come up so often in retirement planning; see TFSA or RRSP after 65, and what the numbers tend to favour.

What changes net income

Because the test is net income on line 23400, anything that lowers it can restore part of the age amount. The common examples:

• Pension income splitting. Moving eligible pension income to a lower-income spouse lowers the transferor’s net income, and with it the age-amount reduction. It also interacts with the pension income amount.
• Timing of withdrawals. Spreading RRSP or RRIF withdrawals over several years rather than taking a lump sum keeps more years below or near the threshold. The RRIF minimum, however, cannot be avoided; see why RRIF minimum withdrawals rise every year.
• Transfer to a spouse. If one partner has too little tax to use the full age amount, the unused portion can generally be transferred to the other partner’s return.

Who this matters for, and what to check

• Anyone 65 or older with net income between about $46,000 and $108,000.
• Couples with unequal incomes, where splitting or a transfer of unused amounts may change the result.
• Anyone planning a large withdrawal or sale in one year: check which side of the threshold the year will land on.
• People with low income: if no tax is owed, the age amount is already doing nothing, and the income-tested GIS is usually the more important number.

The short version

The age amount is worth up to $1,289 of federal tax in 2026. Above $46,432 of net income it fades at 15 cents per dollar and is gone at about $107,819. In that band the effective federal rate on extra income is about 2.1 points higher than the bracket table shows, and above $95,323 the OAS recovery stacks on top. It is the kind of detail that only shows up when the numbers are worked line by line.