Today’s Poll

Your quick tax guide to RRSPs

By Contributor
February 28th, 2014

Tax time is getting closer than we think (2014 deadline to file is April 30) and The Nelson Daily, with help from H&R Block, is providing tips to the public leading up to the final day of filing to Revenue Canada.

Today we focus on tax tips for RRSP (Registered Retirement Savings Plan).

Beat the deadline: The deadline for making a contribution to a Registered
Retirement Savings Plan (RRSP) that can be deducted on your 2013 tax return is
March 3, 2014.

Know your limit: Your contribution limit for 2013 is based on a number of
factors including your earned income in 2012 and your unused contribution room from previous years. It should be included with the Notice of Assessment for your 2012 tax return.

• Over the limit rules: Contributions of up to $2,000 in excess of your RRSP
contribution limit can be made without being subject to a penalty tax.

• Spousal support: A spouse in a higher tax bracket may consider incomesplitting opportunities for the future by contributing to a spousal RRSP.
However, the contributing spouses are limited to their own personal deduction

• Contribution room: RRSP contributions can be carried forward if claimants
foresee being in a higher tax bracket in future years. This will help maximize the tax deduction.

• Age restrictions: If you turn 71 in 2014, you must convert your RRSPs into a
form of retirement income before the end of this year or be taxed on the Fair
Market Value of the plan.

• Withdrawal is considered income: With the economy still uncertain, some
Candians turn to their RRSPs as a source of funds. Money withdrawn from an
RRSP is considered income in the tax year it was received. You will have to add it to the other income you earned during the year on your tax return. While 10 to 30 per cent of an RRSP withdrawal, depending on the amount, is withheld at source, that’s usually not enough to cover the total tax liability.

• Withdrawals without penalties: The Home Buyers Plan (HBP) and Lifelong
Learning Program (LLP) do allow you to withdraw funds from your RRSP
without penalty, as long as they are paid back within the appropriate time
frames. If the funds are not repaid, they will be considered income.

A local H&R Block tax professional in Nelson, Trail and Castlegar can talk about other tips for RRSP contributors.

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