Do I Have To Claim Severance Pay At Income Tax Time

Did you know that you have to claim severance pay at income tax time?

However, there are cases where a severance package will include a portion that can be directly transferred into an RRSP or registered pension plan.   For each year of service before 1989, you can contribute $3,500 to your RRSP.   For the years 1989 to 1995 inclusive, you can contribute $2000 per year. From 1996 onward, there is no eligible portion.

The only way to reduce your tax burden is to contribute to an RRSP.   If you take your severance package as cash, it will be taxed at your personal tax rate.