XXXXXXXXXX
Dear XXXXXXXXXX
We are writing in reply to your letter of February 9, 1993, and further to our recent telephone conversation, wherein you requested clarification regarding the amount at which the Tax on Old Age Security Benefits takes effect.
OUR COMMENTS
The Tax on Old Age Security Benefits is generally calculated as the lesser of 15 percent of the amount by which "net income before adjustments" exceeds the "base amount" and the total amount of the benefits received.
With respect to the 1992 taxation year, the base amount is $53,215. This means that if your net income before adjustments exceeded $53,215, the amount in excess of $53,215 would be taxed at a rate of fifteen percent and added to your total tax payable. The tax would, however, be deducted in computing "net income". There is no legislation, either in place or pending, that would reduce this amount from $53,215 to $20,000 as suggested in your comments. Each year the base amount is adjusted to account for the increase in the consumer price index. For example, the base amount was $50,000 for the 1989 taxation year. This amount was, in turn, increased to $50,850 for 1990, $51,765 for 1991 and $53,215 for 1992.
We are attaching for your information, a copy of the calculation sheet that appears on page 27 of the 1992 T1 General Guide along with copies of pages two and four of the 1992 T1 General Return. On these sheets we have set out a simplified example to illustrate how the calculation is made and where the amounts are reported on the 1992 T1 General return.
We trust our comments will be of assistance to you.
Yours truly,
P.D. Fuoco for Director Business and General Division Rulings Directorate Legislative and Intergovernmental Affairs Branch