Chapter 6 RRSP & other Flashcards
What RRSP related expenses are not tax deductible?
1) Interest paid on funds borrowed to make an RRSP contribution
2) Administrative charges on self directed RRSP
3) Brokerage fees to buy and sell funds in a self directed RRSP
Withdrawal from an RRSP
fully taxable at the marginal tax rate + withholding tax of: - 10% on the first 5,000 -20% on the next 10,000 -30% over 15,000 RRSP contribution room is lost
Max RRSP contribution
the lesser of:
-18% of prior year’s income
-Prior year money purchase limit
+ unused contribution room
Earned income
Employment income (commission, royalties, research grant, unemployment benefit, profit sharing plan) + Disability payment + Net income + Net rental income + Taxable support payment
What income are NOT included in employment income
1) Investment income
2) Pension benefit
3) Retiring allowance
4) Severance pay
5) Death benefit
6) business income earned as a limited partner
Transfers that do not affect RRSP contribution room
1) from an unmatured RRSP from the same individual
2) Commutation payment from RPP, DPSP or RRSP
3) Excess amount from a RRIF
4) Spousal rollover (from a deceased spouse)
5) retiring allowance and/or severance pay
Severance pay
Entitlement that may be payable to an employee of the public service upon termination of employment
RRSP pension income splitting
must be over 65 or split payment from a annuity as the result of the death of the original annuitant. Pension eligible for splitting includes: lifetime annuity from RRSP, RPP, DPSP, RRIF and LIF
RRSP overcontribution
Up to 2000 without penalty, over that amount 1%/month + the entire over contribution is not tax deductible
Home Buyer Plan
Can borrow up to $25000 to buy a “qualifying home” for “first time buyer” that must be repaid that must be repaid in no more than 15y. No tax or withholding tax on the withdrawal
First time buyer for HBP
person who with or without a spouse or common law partner did not own a home and occupy it as principal residence during 4 y before the withdrawal
after withdrawal from HBP
taxpayer must buy the qualifying home before october 1st of the year after exept:
1) written agreement to buy by the deadline + purchase by october 1st of the second year + Canadian resident
2) has payed an amount at least = withdrawal by octobler 1st
Repayment of HBP
Must be repaid no less than 1/15 of the amount borrowed each year, but can be repaid faster which will reduce the amount to be repaid each year in the future. if any repayment is less than required amount, the shortfall = taxable income
Lifelong Learning Plan (LLP)
Allows RRSP holder to borrow up to 10000 a year up to 20000 for full time training education for them self or their spouse. Amounts are repayable over 10y. No tax or withholding tax on the withdrawal
Registered Education Saving Plan (RESP)
Contributions are not tax deductible but DO grow tax free. Lifetime contribution limit of 50000 with 1%/month penalty over it.