The Art of Tax Prediction

By Olev Edur

I turn 65 next year, and I’m about to fill out the appropriate forms to apply for Canada Pension Plan (CPP) and Old Age Security (OAS) benefits. One of the questions I have to answer is how much I want withheld for income tax. Is there a percentage figure that I can use to come up with the appropriate number? Everyone I talk to says they just guess and adjust the amount the following year based on whether it was enough or not.

Yes, you can simply guess; as long as you’re reasonably close, any interest due as a result of not having had enough deducted should be relatively minor. What you don’t want to do, if you can avoid it, though, is to have too much deducted. What you would be doing in that event is lending that overpayment money to the government at no cost while you go without it until the following year, when you file your tax return. And, yes, you can always adjust the amount the following year.

A more accurate method would be to first guesstimate your total income for the year. (You can use the previous year’s tax return as a guideline.) Next, you determine your top marginal tax rate (the rate at which those additional benefit dollars would be taxed) and use that percentage. This shouldn’t be too difficult: you can refer to the table of tax rates in the Good Times Retirement Planning Guide (page 39) or go online to

For example, in your home province of Nova Scotia, the tax rate is 24.4 per cent on income up to $44,887 (for 2022, but this amount is indexed to inflation annually and given the high rate of inflation this year, you might assume a threshold figure of $46,000). If the added benefits won’t put you above this mark, you could use that 24.4 figure.

It gets a bit trickier if your total income is high enough that the benefits push you into a higher tax bracket. In Nova Scotia, the next $5,300 or so would be taxed at 29.82 per cent, and the next $38,500 or so would be taxed at 35.32 per cent. You would have to figure out which rate would apply and how much would be taxed at what rate, and then blend those amounts and rates to arrive at an appropriate tax deduction figure.

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