The first $2,000 of pension income, and the credit attached to it

Line 31400 of the federal return carries one of the oldest credits aimed at retirement income: the pension income amount. The rule sounds generous, a credit on up to $2,000 of pension income, until you look at what the Canada Revenue Agency means by pension income. The two pensions most Canadians receive, the Canada Pension Plan and Old Age Security, are not on the list.

This sheet sets out what is, at which age, and what the credit is worth once it is turned into dollars.

What the amount is

The federal pension income amount is the lesser of $2,000 and your eligible pension income for the year. It is a non-refundable credit: it reduces federal tax payable, but it does not create a refund for someone who owes no tax. The provinces and territories have their own versions with their own maximums. For the 2025 tax year the CRA lists, for example, $1,762 for Ontario and $1,719 for Alberta, and Quebec residents follow Revenu Québec’s rules.

What it is worth

Non-refundable credits are converted to tax savings at the lowest federal rate. For 2026 that rate is 14% (it was 14.5% for 2025, after a mid-year cut). So the federal value of a full claim is straightforward:

$280 a year is not life-changing, but it recurs every year for as long as the eligible income continues, and for a couple it can be claimed twice.

What counts at 65 and over

From the year you turn 65, most regular retirement income from private and workplace sources qualifies, including:

• lifetime pension payments from a registered pension plan (a workplace pension);
• payments out of a registered retirement income fund (RRIF), and annuity income from an RRSP;
• regular annuity payments, and certain deferred profit-sharing plan and variable pension benefit payments;
• foreign pensions that are taxable in Canada;
• pension income a spouse has elected to split with you.

What counts under 65

Before 65 the list is much shorter. Lifetime payments from a registered pension plan qualify, as do foreign pensions and elected split pension income. RRIF payments, RRSP annuity income and most other annuity payments qualify under 65 only if they are received because of the death of a spouse or common-law partner. That catches out people who retire early and draw on a RRIF at 60 expecting the credit.

What never counts

• Old Age Security, CPP and QPP payments.
• Death benefits and retiring allowances.
• Income from a US individual retirement arrangement (IRA).
• RRIF amounts transferred to an RRSP, another RRIF or an annuity.
• Foreign pensions that are tax-free in Canada under a treaty.

The working: five returns

Five illustrative people, all with CPP and OAS, show how the rules sort them:

Person B is the most common case and the one most often surprised: a retiree living on CPP and OAS alone has no eligible pension income. Person C shows why a modest RRIF withdrawal from 65 is often discussed in this context; converting part of an RRSP to a RRIF can create eligible income where there was none. Whether that makes sense depends on the rest of the picture, because RRIF withdrawals are taxable and count toward income-tested benefits; see why one extra dollar of income can matter when you receive GIS and why RRIF minimum withdrawals rise every year.

Two limits are worth knowing. The amount is per person and per year: unused room cannot be carried forward to a later year, so a year with no eligible income simply produces no credit. And it is a credit against tax already owed. A retiree whose income is covered by the basic personal amount, the age amount and other credits gains nothing extra from it, which is why it matters most to people with moderate taxable income rather than the lowest incomes. Provincial credits follow their own rules and maximums, so the combined value differs from one province to the next.

Couples and splitting

Eligible pension income can be split with a spouse or common-law partner by election on form T1032. The amount allocated counts as the receiving spouse’s pension income for this credit. So where one partner has a workplace pension and the other has none, splitting can let both claim the $2,000 amount, worth up to $280 federally on each return in 2026. The form’s step 4 works out the amount for each person.

Who this matters for, and what to check

• Anyone 65 or older with any RRIF, annuity or workplace pension income: check line 31400 is claimed.
• Early retirees under 65 drawing on a RRIF: do not count on the credit unless the income follows a spouse’s death.
• Couples where only one partner has eligible income: look at the T1032 election.
• People with low income: a non-refundable credit is worth nothing if no tax is owed, and the age amount and basic personal amount may already cover it.

The short version

The pension income amount gives a federal credit on the first $2,000 of eligible pension income, worth $280 in 2026 at the 14% rate. Workplace pensions qualify at any age; RRIF and annuity income qualify from 65. CPP, QPP and OAS never do. For many retirees the question is not how to claim it but whether they have any income that qualifies at all.