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how do I minimize taxes on severance payments if you leave your job and receive a severance payment its important to do some tax planning otherwise you risk losing a big chunk of your severance package to the taxman the top three ways to minimize taxes on severance payments are number one transfer your severance payments to your RRSP eligible severance can be transferred to your RRSP without affecting your RRSP room and in eligible severance can be transferred to your RRSP as well but only to the extent that you have available RRSP contribution rule so speak with your human resources manager to determine how much of your severance is eligible versus non eligible number two do not take a lump sum cash severance payment while its tempting to have cash in your hands your tax bill will be very high because the cash lump sum severance payment will all be included in your income into the year received if you absolutely must receive cash then ask your employer to spread out the severance pa