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- taxed deferred and therefore taxed when withdrawn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
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- if the amount is withdrawn within 2 years, the income will be included in the contributors income, not the spouses
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
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
5
Q
Treatment of RRSP when transferred
A
- no income inclusion if RRSP transferred in marriage breakdown or for HBP or LLP
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- contribution is not deductible and therefore not taxable when withdrawn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
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)
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