Reg­is­tered Re­tire­ment Sav­ings Plan (RRSP) Con­tri­bu­tions

The Drumheller Mail - - REAL ESTATE -

An RRSP is a re­tire­ment sav­ings plan that you es­tab­lish, that we reg­is­ter, and to which you or your spouse or com­mon-law part­ner con­trib­ute. De­ductible RRSP con­tri­bu­tions can be used to re­duce your tax.

Any in­come you earn in the RRSP is usu­ally ex­empt from tax as long as the funds re­main in the plan; you gen­er­ally have to pay tax when you re­ceive pay­ments from the plan.

Con­tribut­ing to an RRSP Fe­bru­ary 29, 2016, is the dead­line for con­tribut­ing to your RRSP for amounts you want to deduct on your 2015 tax re­turn.

Age limit for con­tribut­ing to an RRSP De­cem­ber 31 of the year you turn 71 years of age is the last day you can make a con­tri­bu­tion to your RRSP. See RRSP op­tions when you turn 71 if this sit­u­a­tion ap­plies to you.

You can con­trib­ute to an RRSP un­der which your spouse or com­mon-law part­ner is the an­nu­i­tant un­til the end of the year your spouse or com­mon-law part­ner turns 71.

Set­ting up an RRSP You set up a reg­is­tered re­tire­ment sav­ings plan through a fi­nan­cial in­sti­tu­tion such as a bank, credit union, trust or in­sur­ance com­pany. Your fi­nan­cial in­sti­tu­tion will ad­vise you on the types of RRSP and the in­vest­ments they can con­tain.

You may want to set up a spousal or com­mon-law part­ner RRSP. This type of plan can help en­sure that re­tire­ment in­come is more evenly split be­tween both of you. The ben­e­fit is great­est if a higher-in­come spouse or com­mon-law part­ner con­trib­utes to an RRSP for a lower-in­come spouse or com­mon-law part­ner. The con­trib­u­tor re­ceives the short term ben­e­fit of the tax de­duc­tion for the con­tri­bu­tions, while the an­nu­i­tant, who is likely to be in a lower tax bracket dur­ing re­tire­ment, re­ceives the in­come and re­ports it on his or her in­come tax and ben­e­fits re­turn.

You may want to set up a self-di­rected RRSP if you pre­fer to build and man­age your own in­vest­ment port­fo­lio by buy­ing and sell­ing a va­ri­ety of dif­fer­ent types of in­vest­ments. For more in­for­ma­tion on el­i­gi­ble in­vest­ments, see Self-di­rected RRSPs. If you are con­sid­er­ing this type of RRSP, be sure to

con­sult with your fi­nan­cial in­sti­tu­tion. You make your RRSP con­tri­bu­tions di­rectly to the RRSP is­suer. For more in­for­ma­tion, con­tact a qual­i­fied in­vest­ment ad­vi­sor. (RRSP). Gen­er­ally, the amount you can con­trib­ute to your RRSPs or your spouse or com­mon-law part­ner’s RRSPs, for a given tax year with­out tax im­pli­ca­tions is de­ter­mined by your RRSP de­duc­tion limit. This is of­ten called your “con­tri­bu­tion room.” Amounts that you con­trib­ute above this limit may be con­sid­ered ex­cess con­tri­bu­tions (over-con­tri­bu­tions).

Your RRSP de­duc­tion limit is the amount of RRSP con­tri­bu­tions that you can deduct on your tax re­turn for a given year.

Con­tri­bu­tions you make to a spousal or com­mon-law part­ner RRSP re­duce your RRSP de­duc­tion limit. The to­tal amount you can deduct for con­tri­bu­tions you make to your RRSP or your spouse’s or com­mon-law part­ner’s RRSP can­not be more than your RRSP de­duc­tion limit. For more in­for­ma­tion, see How much can I con­trib­ute and deduct?

If you can­not con­trib­ute to your RRSP be­cause of your age, you can still con­trib­ute to your spouse’s or com­mon-law part­ner’s RRSP un­til the end of the year he or she turns 71. For more in­for­ma­tion, see RRSP op­tions when you turn 71.

Ex­am­ple: Joey’s 2014 RRSP de­duc­tion limit is $10,000. Joey con­trib­utes

$4,000 to his RRSP in 2014, and $6,000 to his com­mon-law part­ner Ghis­laine’s RRSP in 2014. Joey deducts the $4,000 he con­trib­uted to his RRSP on line 208 of his 2014 in­come tax and ben­e­fit re­turn. Al­though Joey con­trib­uted $6,000 to his com­mon-law part­ner’s RRSP in 2014, he de­cides to only deduct $5,500 of this con­tri­bu­tion on his 2014 in­come tax and ben­e­fit re­turn. He may be able to deduct the re­main­ing $500 ($10,000 – $9,500) on a fu­ture year’s in­come tax and ben­e­fit re­turn.

Funds in an RRSP can­not be moved or trans­ferred to an RRSP that does not have the same an­nu­i­tant as the RRSP where the money is com­ing from. For ex­am­ple, you can­not trans­fer funds in your RRSP to a spousal or com­mon-law part­ner RRSP.

In­for­ma­tion ac­quired from http://www.cra-arc.gc.ca

Note Con­tri­bu­tions to a pooled reg­is­tered pen­sion plan (PRPP) or a spec­i­fied pen­sion plan (SPP) are sub­ject to the same rules as RRSP con­tri­bu­tions. Con­tribut­ing to your spouse’s or com­mon-law part­ner’s RRSPs How much can I con­trib­ute and deduct?

Note Con­tri­bu­tions to a pooled reg­is­tered pen­sion plan (PRPP) or a spec­i­fied pen­sion plan (SPP) are sub­ject to the same rules as RRSP con­tri­bu­tions. For more in­for­ma­tion, go to Con­tri­bu­tions to a PRPP or see “Spec­i­fied pen­sion plan con­tri­bu­tions” at Spec­i­fied pen­sion plan lump-sum pay­ments.

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