It’s that time again to start thinking about a possible top up of your RRSP for the 2017 tax year. Contributions to your RRSP are deducted from your income in the year contributions are made up to 60 days subsequent to the year end. You have until Thursday March 1, 2018 to contribute to your 2017 RRSP account. An RRSP also provides the benefit of accumulating tax-free earnings on the investment. The amount you are allowed to contribute is 18% of your EARNED income in the previous year. This room accumulates from year to year. You need to be careful not to overcontribute as you will be penalized by CRA. Any withdrawals of your RRSP will be taxed in the year it is withdrawn. When considering your RRSP contributions and withdrawals it is important to tax plan. Fluctuations in your income from year to year may make RRSP contributions and withdrawals another useful tax planning tool. For example, if you intend on selling an asset in 2018 that will result in a large taxable gain, you may want to hold off on contributions for 2017 as the deduction may be more beneficial to apply in 2018. Don’t forget to take advantage of the “spousal” RRSP rules where you can. If your spouse is in a lower income level than you, you can contribute in her name. You will get the deduction and the withdrawal will later be in her name, evening out your income in your retirement years. You must pay close attention to spousal withdrawals if within three years of the contribution as there are anti-avoidance rules that may cause the withdrawal to be taxed in your hands. Talk to a professional at White Kennedy to assist you in your RRSP contribution and withdrawal tax planning.
The information presented is only of a general nature, may omit many details and special rules, is current only as of its published date, and accordingly cannot be regarded as legal or tax advice. Please contact our office for more information on this subject and how it pertains to your specific tax or financial situation.
Written by Susanna Mayhew – Manager
White Kennedy LLP – Chartered Professional Accountants