RRSP deduction limit
QUESTION:
Information
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I am full time employed, where the employee has a defined benefit plan. I also am self-employed where my business had a loss.
As a result this reduces my overall income (18% of 2006).
For e.g. Employment income 100k and Total income 35K (65k self employment loss).
During the year 2006 I was able to get away barely on tax on excess contributions. I am however concerned in 2007 if this could be an issue.
Question
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What are my options?
What is the optimal solution?
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david ingram replies:
You are only allowed to put up to $2,000 extra into an RRSP. If you put more than $2,000 over the allowable calculated 'room', the penalty is 1% per month. rental and business losses take away fromthe room and is the best reason I know for NOT making monthly RRSP payments.
The CRA is finally using their computer to track down people with excess RRSP contributions and sending out demand letters for an accouinting. Going back 10 years, it is not unusual to come up with $10,000 worth of penalties althought he old rules were that you could have $8,000 in excess. One fellow I know of kept on buying the amount he was 'over' every year until it caught up with him.
The smart option is to withdraw any excess contributions by filling in form T3012 -
http://www.cra-arc.gc.ca/E/pbg/tf/t3012a/t3012a-06e.pdf
You are likely better off without an RRSP anyway. Consider paying down your mortgage and using a leveraged account to make the investment you might have made in an RRSP. �
Information
===========
I am full time employed, where the employee has a defined benefit plan. I also am self-employed where my business had a loss.
As a result this reduces my overall income (18% of 2006).
For e.g. Employment income 100k and Total income 35K (65k self employment loss).
During the year 2006 I was able to get away barely on tax on excess contributions. I am however concerned in 2007 if this could be an issue.
Question
========
What are my options?
What is the optimal solution?
----------------------------------------------------
david ingram replies:
You are only allowed to put up to $2,000 extra into an RRSP. If you put more than $2,000 over the allowable calculated 'room', the penalty is 1% per month. rental and business losses take away fromthe room and is the best reason I know for NOT making monthly RRSP payments.
The CRA is finally using their computer to track down people with excess RRSP contributions and sending out demand letters for an accouinting. Going back 10 years, it is not unusual to come up with $10,000 worth of penalties althought he old rules were that you could have $8,000 in excess. One fellow I know of kept on buying the amount he was 'over' every year until it caught up with him.
The smart option is to withdraw any excess contributions by filling in form T3012 -
http://www.cra-arc.gc.ca/E/pbg/tf/t3012a/t3012a-06e.pdf
You are likely better off without an RRSP anyway. Consider paying down your mortgage and using a leveraged account to make the investment you might have made in an RRSP. �
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