My_question_is: Canadian-specific
Subject: Early withdrawing from RRSP
Expert: taxman at centa.com
Date: Thursday November 30, 2006
Time: 06:54 PM -0500
QUESTION:
Hello,
Over the years I have accumulated some significant amount on my RRSP.
Recently, I carried a few successful trades on my self directed RRSP. I am
33 and won't need this money in the nearest time, however I would really
welcome some cash to pay off the outstanding balance on my borrowing
account. I am thinking of converting my trading gains into cash.
In my brokerage firm I was told that on top of the processing fee I would
need to pay some 10% of government taxes. I understand 10% would not have
anything to do with the income tax, which will be taken only by the end of
the tax year.
My question is if there any Early Withdrawal Tax in place in BC/Canada or,
if not, then what would be the origin of the 10% tax.
Thank you,
----------------
david ingram replies:
The 10% is a minimum withholding tax which ranges from 10% to 25% depending
upon how much you take out at a time.
If you deregister $5,000, the withholding is 10%. If you deregister
$30,000, the withholding is 25%.
If you earn 140,000 this year and the deregistered amounts are added at the
top, your tax rate will be about 44% and you will owe the difference to the
CRA.
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