# Tax implications on cashing in RRSP during a negative income year?



## runner39 (Mar 11, 2010)

Even if I cash in my RRSP this year I will have a overall negative income. What if any tax would I pay on cashing in my RRSP?


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## OhGreatGuru (May 24, 2009)

How do you arrive at a negative income? If you are relying on capital losses, they can only be written off against capital gains, not other forms of income.


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## runner39 (Mar 11, 2010)

negative income not from capital losses


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## Plugging Along (Jan 3, 2011)

Could you be a little more specific. You often can't take losses of one type of income and write off other types. I assume that you didn't pay someone so you could work


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## MoneyGal (Apr 24, 2009)

Could be business losses from self-employment. 

As far as I know, if you have no other income, and you withdraw an amount which is less than the basic personal exemption, you will pay no tax on the withdrawn amount. There will still be a minimum withholding amount, but it would be refunded when you file your taxes for that year.


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## Homerhomer (Oct 18, 2010)

MoneyGal said:


> Could be business losses from self-employment.
> 
> As far as I know, if you have no other income, and you withdraw an amount which is less than the basic personal exemption, you will pay no tax on the withdrawn amount. There will still be a minimum withholding amount, but it would be refunded when you file your taxes for that year.


That's correct.

This is one of those situations where cashing in rrsp makes perfect sense, you get tax break when contributing and pay no tax when cashing (once personal taxes are filed).

The only problem is loosing rrsp room, however many don't even come close to maximizing the contribution in the first place.


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## balexis (Apr 4, 2009)

Contribute during large income years, withdraw on small income year. Perfect situation to do that!

If I had such a year, I'd withdraw even more than the basic exemption, say up to the first tax bracket (if I had enough in my rrsp and if the markets were not in a rock bottom) in order to maximize the fiscal benefit. Then dump the proceeds in a TFSA and you're in a sweet spot!


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## runner39 (Mar 11, 2010)

MoneyGal said:


> Could be business losses from self-employment.
> 
> As far as I know, if you have no other income, and you withdraw an amount which is less than the basic personal exemption, you will pay no tax on the withdrawn amount. There will still be a minimum withholding amount, but it would be refunded when you file your taxes for that year.


so any withholding tax that comes off from withdrawal will be refunded after filing income tax if income negative?

eg. withdrawal $30,000, pay 9,000 withholding tax(30%) and if income negative get the 9 grand back


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## MoneyGal (Apr 24, 2009)

Yes. I'm not sure why I expressed hesitation earlier. After I posted, I looked it up and homerhomer is right.


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## sprocket1200 (Aug 21, 2009)

but how do you actually have negative income? aren't business losses just carried forward to be applied against future income?


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## MoneyGal (Apr 24, 2009)

But in the year of a loss, there is "negative income." Whether the loss can or is carried forward is a separate matter.


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