The ins and outs of GIS for low-income seniors
What happens when your retirement savings run out? If your registered retirement income fund (RRIF) is depleted and your taxable income declines, you should apply for Guaranteed Income Supplement (GIS).
If you qualify, you can receive tax-free GIS benefits on top of your basic Old Age Security (OAS) benefits. OAS provides up to $585 per month. GIS provides up to $874 per month.
GIS benefits are income-tested. They will not start automatically. You must apply. You only need to apply for GIS once. After that, Service Canada will automatically review your GIS entitlement each year, right after you file your income tax return.
GIS INCOME TEST
The cut-off income level for GIS entitlement depends on your age and marital status. For a single senior the GIS cut-off point is when your yearly income exceeds $17,760. The cut-off income level does not include OAS pension and the first $3,500 of employment income.
If you are a senior with income of $14,000, for example, you may be entitled to about $156 per month of supplement. Type the keywords “guaranteed income supplement rate” into your favourite internet search engine to find the online table of GIS rates on the Government of Canada website.
GIS entitlement depends on your household income. If you are married or living commonlaw, Service Canada also needs to know the income of your spouse or partner when you apply for GIS.
GIS benefit levels will be adjusted every July according to income reported on your previous year’s income tax return. For every dollar of additional annual income, GIS benefits for the following year are reduced by 50 cents. In effect, the GIS income test is equivalent to a 50-per-cent marginal tax rate.
For a couple, the GIS cut-off level for household income is $23,472 (excluding OAS) when both spouses are OAS recipients. However, while one spouse is still under 65, the cut-off level is $42,576. If you are retired and living on non-registered savings, prior to starting RRIF withdrawals, your income could possibly be low enough to qualify for some GIS.
SASKATCHEWAN SENIORS INCOME PLAN
Saskatchewan automatically provides a monthly provincial supplement (plus other health benefits) for pensioners who qualify for federal GIS benefits.
SPOUSE IN CARE HOME
What if your lower-income spouse moves into a nursing home? If you are forced to live apart because of your spouse’s need for long-term care, your spouse may be eligible to receive higher GIS benefits based on his or her individual income — as opposed to your combined income as a couple.
To be eligible, you must advise Service Canada in writing by submitting the statement — spouses living apart for reasons beyond their control — explaining your living situation. Indicate the date that you and your spouse were first forced to live apart.
You can also ask Saskatchewan Health to use only the care home resident’s income for determining the rent level by declaring that you and your spouse are involuntarily separated.
Filing such forms does not change your marital status to separated for income tax purposes. The higher income spouse can still claim care home rent as a medical expense. Pension splitting would still be possible but it could decrease the care home resident’s GIS entitlement and may increase care home rent.
DEATH OF SPOUSE
If your spouse has died, notify Service Canada of your change in marital status. You can apply for GIS based only on the survivor’s individual income for the prior year. If the deceased had been receiving OAS, a surviving spouse as young as 60 can receive an income-tested “allowance for the survivor.”