Line 130 – Retiring allowance (severance pay)
A retiring allowance is an amount you receive on or after retirement from an office or employment in recognition of long service. You may also receive this amount if you lose your office or employment, whether you were dismissed or have resigned.
It may include payment for unused sick leave and amounts you receive for loss of office or employment, whether as a payment of damages or a payment under an order or judgment of a tribunal.
It does not include accumulated vacation leave credit or income from a retirement compensation arrangement.
A retiring allowance may be made in lump-sum payments, but you must include them in income when you receive them.
Generally, the amounts should be shown on these slips:
- a T4 Statement of Remuneration Paid (slip) in boxes 66 and 67; or
- a T3, Statement of Trust Income Allocations and Designations (slip) in box 26.
If your retiring allowance is shown on a T3, Statement of Trust Income Allocations and Designations (slip) details will be shown in box 47 and in the footnotes area of the slip.
You may be able to contribute (transfer directly or indirectly) part or all of your retiring allowances to your registered retirement savings plan (RRSP), registered pension plan (RPP), pooled registered pension plan (PRPP), or specified pension plan (SPP). For more information, see Transferring retiring allowances (severance pay).
Tax will not be withheld from the part of your retiring allowance that your employer transfers directly to your RRSP, RPP, PRPP, or your SPP.
Tax will be withheld from the portion of your retiring allowance that is not transferred directly to your RRSP, RPP, PRPP, or your SPP by your employer.
You may be entitled to deduct legal fees you paid to collect or establish a right to a retiring allowance. For more information, see Line 232 – Legal fees.
A loss of office or employment usually refers to the elimination or expiration of a particular office or employment, for example, the abolition of a job or position for economic reasons or as the consequence of an employer's withdrawal from a particular business. However, a loss of office or employment may also refer to the loss of an income source of an employee who is released from an office or employment whether unilaterally or not.
Completing your income tax and benefit return
On line 130, enter the retiring allowance shown in boxes 66 and 67 of your T4 slips.
On line 130, enter the amount from box 26 of your T3 slips.
If you transferred an amount, complete Schedule 7 – RRSP and PRPP Unused Contributions, Transfers, and HBP or LLP Activities, and include it with your income tax and benefit return.
Forms and publications
- Folio S2-F1-C2, Retiring Allowances
- General Income Tax and Benefit Guide
- Guide T4040, RRSPs and Other Registered Plans for Retirement
- Pamphlet P119, When You Retire
- Transferring retiring allowances (severance pay)
- RRSPs and related plans
- Line 208 - RRSP deduction
- Line 232 - Legal fees
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