Just take it step by step, and you’ll be finished before you know it
By Olev Edur
It’s tax time again, so gather your receipts, tax slips, notes, and reminders, and any other documentation that may be required, and have at it. But first, you should be aware that the 2025 T1 tax return contains a few significant changes from previous years.
Certainly the most significant change for 2025 is the reduction in the lowest federal tax rate, applicable on income up to $53,750. The rate actually changed mid- year: it was 15 per cent for the first half of the year and 14 per cent for the second half; the result is a blended rate of 14.5 per cent for the entire year. The same goes for calculating your non-refundable credits, which are based on the lowest marginal tax rate, with the exception of the credit for charitable donations and gifts. (As discussed below, a much higher rate applies to yearly donations above $200.)
Unfortunately, while lower tax rates are always welcome, the rate reduction means lower tax credits, too, so you’ll be getting slightly less of a tax break.
There’s also a new non-refundable “top-up” credit for 2025 to “effectively maintain a 15 per cent rate for certain non-refundable tax credits claimed on amounts over the first income tax bracket threshold of $57,375 for 2025.” At press time, however, the canada.ca link for line 34990 (where the top-up is applied) wasn’t functional, and the relevant part of the federal worksheet wasn’t helpful in explaining how this top-up actually works. Hopefully by the time you do your return, this problem will be resolved.
In addition to the above tax and credit changes, many of the other figures appearing in the return—such as the marginal tax rate thresholds and the dollar amount of most credits—are indexed to inflation and change each year.
As a result, if you’re referring to past returns in your calculations, be sure any entries you make on the 2025 return are based on the latest figures. The guide that once accompanied the return has been eliminated, so if you want to get more information about a specific line item and that information isn’t provided in your software, you can find it by going to canada.ca/line-xxxxx and replacing “xxxxx” with the relevant five-digit line number. For example, go to canada.ca/line-10100 for information about line 10100.
Options for Completing the Return
When it comes to actually completing the return, our tax rules have grown so complicated, with so many calculations, cross-references, and convoluted rules, that it’s no longer practical to try to complete the return manually. There are so many pitfalls for the unwary that even if you have a relatively “simple” return, the time and effort required to complete it accurately on your own can be onerous.
As a result, if you aren’t using the services of a licensed professional or qualified tax-return service such as H&R Block, then it’s highly recommended that you obtain a Canada Revenue Agency (CRA)-approved tax-preparation software program. Refer to the CRA’s list of approved programs at canada.ca (search for “find-soft- ware”); many are available free of charge, while others are available at modest cost.
These programs should include most of the forms and schedules required to complete your return, but if you’re still intending to go the manual route, all paper forms, guides, and schedules can be obtained on the CRA website. Alternatively, electronic versions can be downloaded.
Seniors with a low income and a relatively straight-forward return may be able to avail themselves of free assistance through the Community Volunteer Income Tax Program (CVITP), or in Quebec, the Income Tax Assistance – Volunteer Program. You can also find out if you qualify, or locate a tax-preparation clinic near you on the website.
The CRA has also announced the introduction of a SimpleFile service for eligible tax filers with a low income and a simple tax situation, although it will be available by invitation only. Initial invitations will have been issued by the CRA during early-to mid-2025.
If invited, you need only answer a series of quick questions over the phone, and the service uses your answers and the information the CRA has on file to complete and process a return on your behalf. If you’re a Quebec resident, however, SimpleFile will complete only the federal return; you’ll still need to complete and submit a Quebec provincial income tax return.
Meanwhile, if you use tax-preparation software or a professional or service to complete your 2025 return, you also have the option of e-filing. No need to print out a bulky paper return, scoot down to the post office, and pay a sizable postage fee—just click and it’s away. And it will be processed much more quickly than a paper return, so if you’re awaiting a refund, it will arrive that much sooner.
Bear in mind, however, that while software programs, professionals, and tax-preparation services can do all the calculations, handle all the cross-references, and decipher those complex rules, you still need to provide all the basic information about income, tax deductions, credits, and so on. Accordingly, you should take the time to scan the return line by line, reviewing all your documentation and perhaps referring to recent past tax returns, to ensure that you don’t miss something. And always double-check as you go, to ensure that you’re getting all the tax breaks to which you are entitled.
It is also highly recommended that you set up a CRA My Account. This will enable you to get the latest information on the status of your return as well as other tax-related information, such as available RRSP and TFSA contribution room, amounts owing, etc., without having to endure a lengthy wait while trying to get this information by phone. Registration is relatively easy.
Finally, the purpose of this guide is not to cover all the items in this year’s return—that would take up inordinate amounts of space. Rather, the aim is to draw attention to those areas that likely are of relevance to most retirees. If you have specialized circumstances— unusual or sophisticated investments, for example— always double-check with your adviser to ensure that you’re making the best decisions from a taxation perspective before proceeding with your return.
Step 1
Identification and Other Information
There’s not a lot to be said about this section, which comprises the first two pages of the T1 return, other than that you need to make sure that all the required information is provided. If you’re using tax software, it will ask for all the necessary information and then transfer it to the appropriate locations on these pages. In particular, make sure that you acknowledge on page 2 whether or not you owned or held specified foreign property (other than assets such as mutual funds with foreign holdings or other exempt property as specified on Form T1135) with a total value in 2025 of more than $100,000, because omissions can result in penalties as well as delays.
Step 2
Calculating Your Total Income
This is the main part of the return, where you must declare all your worldwide income for 2025. You’re generally required to declare every dollar you received during the year; failure to do so could result in stiff penalties.
There are, however, some specific exceptions that needn’t be declared, including lottery winnings, gifts and inheritances, most life-insurance proceeds, and GST/HST credits. A complete list of tax-exempt earnings is available online.
For the rest, even if you’re using software or a professional to help prepare your return, you still have to gather all the documentation, including the tax slips (T4s and the like) that must be provided for most types of income; exceptions are rental or self-employment income (see below) or, in some cases, “other” employment income not included in a T4, such as tips or gratuities. If any tax slips are missing, and you have made reasonable efforts to get them, you should use your own information or at least provide a best estimate of the amount(s) involved.
Following are income items of potential interest to most seniors, although this isn’t a comprehensive list; individual circumstances vary, so have a look at each line in this part of the return to ensure that you don’t miss anything.
• Employment income (lines 10100, 10105, and 10400):
CRA taxation statistics for 2023 show that more than one million Canadians continued to work part- or full-time past age 65 that year, and although more recent data is not yet available, there’s no reason to believe that fewer seniors did so in 2025. The information to be entered on line 10100 will appear on your T4 slip(s), while commissions must be entered on line 10105. Any other employment income, as reported on T4, T4A, or T4PS slips, and income not reported on tax slips, such as tips or gratuities, goes on line 10400.
• Pension income (lines 11300, 11400, 11500, 11600, and 14600):
Most people aged 65 or older receive Old Age Security (OAS) benefits as per T4A(OAS) slips, and this income goes on line 11300. Lower-income pensioners may also receive Guaranteed Income Supplement (GIS), an adjunct of OAS, which must be entered on line 14600; GIS is not taxable, however, and this amount can be deducted later on line 25000. Canada/Quebec Pension Plan (CPP/QPP) retirement benefits go on line 11400, as per T4A(P) slips, while CPP/ QPP disability benefits go on line 11410. Income from private pensions is entered on line 11500, as is income from RRIFs or annuities once you are aged 65 or older; younger recipients must enter RRIF income on line 13000 and the earnings portion of annuity payments on line 12100. All income entered on line 11500 qualifies for the $2,000 annual pension credit on line 31400. In the case of pensions from a foreign country, refer to the canada.ca website for guidance on how this income should be declared.
You’re allowed to split pension income with your spouse/common-law partner, but both parties must complete Form T1032. Then the person receiving the income must declare the shared amount on line 11600, while the contributor can deduct it on line 21000. You can also opt to share CPP/QPP retirement benefits equally, but you must complete the online CPP Pension Sharing form on your CRA My Account page or get a copy of the Application for CPP Pension Sharing of Retirement Pension(s) (ISP1002) from canada.ca if it isn’t included in your tax-return software. Complete the form and take it to the nearest Service Canada outlet; QPP recipients should contact Retraite Québec for further information on sharing benefits.
• Investment income (lines 12000, 12010, 12100, and 12700):
Most seniors receive investment income in various forms, such as interest, dividends, and capital gains. This income will be itemized in the T5 tax slips you should receive.
There are two types of dividends (“eligible” and “other than eligible”). The amounts you actually receive must be “grossed up” to taxable income amounts, and then you’re accorded an offsetting dividend tax credit (DTC) on line 40425; the grossed-up and credit amounts differ for the two types. You must do the relevant calculations on the Federal Worksheet accompanying the return and then enter the amounts on lines 12000 and 12010; don’t forget the DTC—CRA data show that many seniors overlook this tax break every year.
• Interest income is declared on line 12100 after completing the appropriate section of the Federal Worksheet.
This line is also used for declaring foreign interest or dividends (which aren’t eligible for the DTC). Note that taxation of interest on multi-year GICs, term deposits, and similar investments must be paid yearly but is based on anniversaries of the purchase date, not calendar years. So, for example, if you purchased a two-year GIC on July 1, 2025, the first year’s income—through June 2026—would be declared next April on your 2026 return rather than being split between 2025 and 2026. Line 12100 is also where you enter the earnings portion of annuity payments, as per T5 slips.
• Capital gains (line 12700) become taxable only when an underlying capital asset is sold at a profit, and generally only one-half of any gains are taxable. The taxable amount must be entered on line 12700 after completing Schedule 3. If an asset is sold at a loss, the resulting capital loss can only be used to offset capital gains but can be carried forward indefinitely.
• RRSP income (line 12900):
If you withdrew money from an RRSP in 2025, this generally must be reported on line 12900 (per T4RSP slips). If, however, the income stemmed from the death of a spouse/common-law partner, you may be able to claim a deduction for part or all of it; refer to Guide RC4177, Death of an RRSP Annuitant, for details.
• Rental income (lines 12599 and 12600):
As with employment income, CRA data show that increasing numbers of retirees are earning rental income these days. Get Form T776 from canada.ca, along with any other required forms and information, and then enter the gross and net income figures on these lines.
• Self-employment income (lines 13499 through 14300):
This income must be entered on the appropriate lines, depending on the type of self-employment, after completing a statement of income and expenses and possibly additional forms. Get a copy of Guide T4002 and additional forms, if not included in your software, at canada.ca.
Finally on page 3, you must enter certain payments, including social assistance on line 14500 and GIS on line 14600, and add them together on line 14700 to arrive at a total income figure on line 15000, which is carried forward to page 4 of the return. (And don’t forget to claim the offsetting deduction of GIS income on line 25000.
Steps 3 and 4
Deductions From Total Income
After arriving at a total income figure on line 15000 and copying it to the top of page 4, you can deduct certain amounts to arrive at a net income figure on line 23600 and then a taxable income figure on line 26000 of page 5.
The following are items that might be of relevance to retirees as well as to those still saving for their retirement, although, as noted above, you should go through these sections of the return line by line to ensure that you’re not missing any tax breaks to which you are entitled:
– line 20700. If you made contributions to a pension plan or an RRSP in 2025, you can claim the amounts here (per T4 and/or T4A slips). You may also need to enter your pension adjustment and pooled registered pension plan (PRPP) employer contribution amounts on lines 20600 and 20810, respectively.
– line 20800. This is where you claim a deduction for contributions made to an RRSP. Note that you need not claim the deduction the same year you make a contribution; you can save the deduction for use in a future year if that’s advantageous—if, for example, you can foresee a high-income year in the future. And unlike RRSP contributions, these deductions can be carried forward as long as you live, rather than ending after age 71.
– line 21000. As noted for line 11500 above, if you’re splitting pension income with a spouse/common-law partner, you claim the amount that’s going onto your spouse’s return here, after completing Form T1032.
– line 21500. Disability supports deduction; complete Form T929.
– line 22100. If you incurred carrying charges, such as interest on investment loans or fees for obtaining tax-preparation software or having a professional complete your tax return, you can claim them here.
– line 22200. This is where the self-employed can claim a deduction for CPP/QPP contributions, after completing Schedule 8 (Form RC381 in the case of QPP).
– line 23500. You may be subject to a clawback of OAS and/or other social benefits if your income is above certain thresholds; if so, you must complete the chart for line 23500 on the Federal Worksheet and then enter the result on that line and on line 42200 on page 7. Finally, deduct this amount from line 23400 (net income before adjustments) to arrive at a net income figure on line 23600, which you carry forward to page 5.
Next, you’re allowed certain further deductions to arrive at a taxable income figure on line 26000. Generally, these deductions would apply to only a limited number of seniors, but you may, for example, be able to claim deductions for exempt foreign income or for adult basic education tuition assistance on line 25600.
Step 5
Federal Tax, Non-Refundable Credits, and Net Federal Tax
Once you have a taxable income figure, you must perform the calculations in Part A to determine your federal tax and carry this figure over to line 116 on page 7.
Then coming back to Part B, you can claim a variety of federal non-refundable “amounts,” which are multiplied in most cases by 14.5 per cent to determine your credit total. (“Non-refundable” simply means the credits can’t be used to generate a cash refund once your tax bill reaches zero.) You may, however, be able to transfer unused portions of certain amounts to a spouse or other family members; see below.
Most tax filers will be entitled to the basic personal amount (line 30000) of $16,129, but if your 2025 income was more than $177,882, you’ll have to complete the relevant part of the Federal Worksheet to determine your entitlement; those with an income of $253,414 or more can claim $14,538.
If you were 65 or older at the end of 2025, you can claim the age amount (line 30100) of up to $8,790. Complete the relevant calculation on the Federal Worksheet to determine your entitlement.
On line 30300, you also can claim a basic amount of up to $16,129 for a spouse/common-law partner you supported, plus $2,616 if your partner was disabled, after completing the relevant section in Schedule 5. Similarly, if you have an eligible dependant, you may be able to claim $16,129, plus $2,616 if they were disabled, on line 30400 as per Schedule 5.
In addition to the above $2,616 disability add-on and the caregiver deduction on line 21500, numerous credits are related to disabilities, medical expenses, and care-giver costs, including:
– Canada Caregiver amount (applicable to lines 30300, 30400, 30425, 30450, and 30500)
– Canada Caregiver amount for spouse or common-law partner or eligible dependant age 18 or older (line 30425, after completing Schedule 5)
– Canada Caregiver amount for other infirm dependants age 18 or older (line 30450)
– Canada Caregiver amount for infirm children under 18 years of age (lines 30499 through 30500)
– Disability amount for self (line 31600) of $9,428, subject to a Disability Tax Credit Certificate from a medical practitioner
– Disability amount transferred from a dependant (line 31800); complete the relevant part of the Worksheet
– Medical expenses for self, spouse or common-law partner and dependent children born in 2003 or later (line 33099)
– Allowable amount of medical expenses for other dependants (line 33199)
You also may be able to claim a refundable medical expense supplement (line 45200 on page 8 of the return).
The interrelated rules for claiming medical, caregiver, and disability credits can be extremely complex, so you’ll need to refer to the appropriate lines at canada.ca to ascertain your entitlements for each of these items. Professional advice can be particularly valuable here, because many thousands of dollars could be at stake, and even with software, it can be difficult to ensure that you’re getting your full entitlements.
Other non-refundable credits of possible relevance to retirees:
– Home-accessibility expenses (line 31285) of up to $20,000 can be claimed on the cost of modifications to make your home more accessible and livable; refer to canada.ca and complete the relevant part of the Federal Worksheet.
– You can claim a pension income amount (line 31400) for up to $2,000 of any income that appears on line 11500.
– On line 32600, you can claim up to $5,000 in amounts for which your spouse/common-law partner qualified but didn’t need in order to reduce their federal tax to zero, after completing Schedule 2. Qualifying amounts include the Canada Caregiver (line 30500), age (line 30100), pension income (line 31400), disability (line 31600)—a completed and certified Form T2201, Disability Tax Credit Certificate, is required—and tuition (line 32300) amounts.
All these amounts are tallied up on line 33500 and then multiplied by 14.5 per cent to arrive at a credit subtotal on line 33800. Then if you made any charitable donations or gifts in 2025 (or in the preceding five years but haven’t yet claimed a credit for them), complete Schedule 9 and enter the resulting credit on line 34900.
Add the two totals together to arrive at a credit total on line 35000, which you then transfer to line 121 on page 7 of the return. If you declared any dividend income on lines 12000 or 12010, you can claim a dividend tax credit on line 40425 after completing the relevant section of the Federal Worksheet.
Then come several other tax and credit items of possible relevance to some retirees, including the claim for Advanced Canada Workers Benefit (line 41500, after completing Schedule 6), and you end up with a net federal tax figure on line 42000.
Step 6
Refund or Balance Owing
Once you have a net income figure, if you were self-employed in 2025, you may need to add in EI or CPP premiums—lines 42100 and 42120 respectively—as well as social benefits repayments from line 23500 on line 42400. Then you must turn to the provincial/territorial return (included in the federal tax package), and once it is completed, you enter the resulting tax figure on line 42800. (This is where a software program can be particularly valuable, because these returns can be almost as complex as the federal return but are based on many of the figures in the federal return.)
After completing the provincial return, you arrive at a total payable figure on line 43500, which is copied to line 148 of page 8. Tally up any amounts you’ve already paid (line 43700), along with certain other deductions such as the refundable medical expense supplement (line 45200), Canada Workers Benefit if applicable (line 45300), the new Multigenerational Home Renovation Tax Credit (line 45355), tax already paid by instalment (line 47600), and provincial/territorial credits (line 47900). Then deduct the total of these items from your taxes and you finally reach the bottom line—a refund or balance-owing figure on line 167.
Finally, sign and date the form (unless you’re using e-file), send it off, and you’re done for another year!
