Deferred Income Plans (RRSP, TFSA, RESP)

Question 1

RRSP

Answer 1

• taxed deferred and therefore taxed when withdrawn
• can be contributed into (to the limit) up to and including age 71
• contribution deadline = 60 days after year end
• RRSP contribution is deductible against all income types however there is a deduction limited (but $2000 over contribution is allowed without penalty)
• penalty for over contribution: 1% for over contribution per month

Question 2

RRSP contribution to spouse RRSP

Answer 2

• if an individual contributes to a spouse RRSP, they will receive the deduction, not the spouse
• the individual must have the contribution room and the contribution will not impact the spouses room
• if the amount is withdrawn within 2 years, the income will be included in the contributors income, not the spouses

Question 3

RRSP deduction limit

Answer 3

• A + B + R - C
• A: unused deduction room from PY (limited to 18% of PY earned income)
• B: lesser of RRSP limit for the year, 18% of taxpayer earned income in the PY, pension adjustment in the PY or prescribed amount
• R: pension adjustment reversal
• C: past service pension adjustment in PY

Question 4

Pension adjustment and RRSP

Answer 4

• pension adjustment reduces RRSP limit so if a pension adjustment is reversed, the reversal will be added back to RRSP limit
• pension adjustment reversal would be incurred when an employee leaves before entitled to pension

Question 5

Treatment of RRSP when transferred

Answer 5

• no income inclusion if RRSP transferred in marriage breakdown or for HBP or LLP

Question 6

TFSA

Answer 6

• contribution is not deductible and therefore not taxable when withdrawn
• excess contribution penalty of 1% of excess contributed amount
• if TFSA transferred to spouse on death, it is not taxable but if it is transferred to a non-spouse it is taxable

Question 7

RESP

Answer 7

• Education assistance program amount is taxable to the student
• if the child does not go to school the amounts from the government must be repaid and other amounts are taxable to the contributor or transferred to their RRSP
• Limited to $50,000 per beneficiary (student)

Question 8

RRSP withdraw special circumstances

Answer 8

1) HBP
- withdraw to buy a home
- cannot have owned home in prior 4 calendar years
- max withdraw is $35k per person
- repayment is over 15 years and starting 2nd year post withdraw
2) LLP
- withdraw to attend designated education program
- individual or spouse can withdraw
- $10k per year to a max of $20k total
- repay over 10 years starting 5th year post withdraw