Ministère des Finances
Ministère des Finances
Work income kept on retirement in 2023
The calculator of work income kept at retirement estimates the share of work income that remains in a pensioner’s portfolio once taxation has been considered when the pensioner resumes employment.
The calculator facilitates enlightened financial decision‑making since it clearly indicates disposable income before and after the resumption of employment. The overview considers the Québec and federal tax systems but also the employment incentive measures to which workers may be entitled, depending on their situation.
Government withholdings and clawback
The calculator can be used to estimate the government withholdings that will apply to the work income of a pensioner and the required contributions that will be deducted from such income.
The calculator also considers the impact of work income on socio‑fiscal transfers, which might decrease because of the increase in the taxpayer’s total income.
Employment incentives
The Québec and Canadian taxation systems contain measures that seek to protect from taxation certain work income, whether to recognize employment‑related expenses or to encourage taxpayers to return to the labour market or to remain there.
Some measures, such as the deduction for workers, apply to all workers, while others, such as the tax credit for career extension, are specific to experienced workers.
The calculator indicates the impact of such measures on the tax payable of retired taxpayers who are employed.
Illustrations
The calculator estimates the retention rate of work income, i.e. the proportion of his work income that a taxpayer will keep once taxes and contributions are paid and the change in socio‑fiscal transfers is considered.
Let us take the example of a 61‑year‑old pensioner with an annual pension of $30 000 who wants to estimate the net gain that $15 000 in annual work income would provide.
With this additional work income, the worker would pay $4 995 in additional taxes and contributions and lose $417 in reduced socio‑fiscal transfers, for a reduction in income of $5 412.
However, this worker benefits from a $1 400 tax cut through the tax credit for career extension and an additional reduction of $321 through the deduction for workers and the Canada employment amount. Accordingly, the employment incentives reduce by $1 721 the tax payable.
Consequently, the pensioner’s net gain from work income will be $11 309, which corresponds to a work income retention rate of 75.4%.
Work income
$15 000
Net government withholdings and clawback
-$5 412
Employment incentives
+$1 721
Additional disposable income
$11 309
Retention rate of work income
75.4%
The calculator estimates the additional disposable income of a pensioner when the latter’s potential work income is considered. The calculations are based on certain hypotheses intended to reflect the most common situations. The calculator does not seek to provide a realistic estimate of this amount. However, the exact amount of the tax payable and various required contributions payable can differ depending on the households and their specific situations.
Assumptions that the calculator uses on work income retained upon retirement
The calculator proposes a flexible model adapted to the general situation of some typical households. The results are presented for illustrative purposes.
The calculator does not consider all income, deductions, and tax credits.
The minimum age of household members has been set at 55. Household members can only report work and retirement income, which cannot exceed $250 000. In addition, the maximum Québec Pension Plan (QPP) retirement pension has been set at $25 000.
Other assumptions
No individual is a dependent of another person.
All the households contribute to the public Québec Prescription Drug Insurance Plan (RAMQ) and the eligible expenses under the refundable and non‑refundable medical expense tax credits include the annual premium of the public plan.
Updated May 15, 2023