Deferred Income Plans (RRSP, TFSA, RESP) Flashcards

1
Q

RRSP

A
  • taxed deferred and therefore taxed when withdrawn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
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2
Q

RRSP contribution to spouse RRSP

A
  • 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  • if the amount is withdrawn within 2 years, the income will be included in the contributors income, not the spouses
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3
Q

RRSP deduction limit

A
  • 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
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4
Q

Pension adjustment and RRSP

A
  • 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
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5
Q

Treatment of RRSP when transferred

A
  • no income inclusion if RRSP transferred in marriage breakdown or for HBP or LLP
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6
Q

TFSA

A
  • contribution is not deductible and therefore not taxable when withdrawn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
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7
Q

RESP

A
  • 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)
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8
Q

RRSP withdraw special circumstances

A

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

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