Declare your intent
While buying back credit is almost always a good financial choice, it's important to understand the tax implications of your purchase.
To get you started, we'll reach out to you with some information about your buyback opportunity as soon as your employer informs us of your leave. We'll send you an email approximately 45 days after your leave begins to confirm your buyback cost. You can also visit your Buyback Centre any time after your leave starts to determine your monthly payments, review your buyback costs, and your different options.
If you decide to buy back your leave, you can start paying off your buyback at this time. But you don't have to – you have up to five years from the end of an eligible leave of absence or break in service (or the date of your first pension payment, whichever comes first) to buy back credit for the absence. If you miss the deadline, you forfeit the opportunity to buy back.
Different deadlines also apply if you buy back other eligible periods, such as credit for other employment.
Pay during your absence
You can start paying for you buyback when you begin your absence by providing us with postdated cheques or by setting up automatic bank withdrawals. By paying during your absence, you avoid interest charges and there's no risk of missing the five-year payment deadline.
Keep in mind, you cannot prepay for an absence that extends into future calendar years. Your Buyback Centre shows the maximum lump-sum amount you can pay toward the principal cost of your buyback for the current calendar year.
Pay when you return to work
You can also begin paying for your leave when you return to work. If you plan to pay for your buyback with cash, we recommend paying for your buyback when you return from work. Why? You'll receive a tax receipt from us in February for any cash payments you make. You can use it to claim a deduction on your income tax return, which will lower your taxable income.
Keep in mind, as soon as your leave ends, interest will begin to be charged to your buyback.
How to pay
Exceptions to the five-year deadline
An exception applies to this deadline if your employer arranges for you to work outside of Canada in any capacity during your absence. In that situation, the CRA requires that you buy back the credit before your leave ends. If this requirement applies to you and you have questions about how it may affect your buyback, please contact us.