# purposely overcontributing to rrsp?



## twowheeled (Jan 15, 2011)

I'm curious as to the consequences of using up the allowable $2000/lifetime limit for overcontribution to a rrsp. It seems like something to be taken advantage of since the overcontribution will still be tax sheltered? How does this work? 

Particularly, I want to carry all my allowable 2010 contribution to 2011 because I will be earning a much larger income and need the tax break. Since my taxes aren't too high I will have some extra investment money that I would like to overcontribute into my rrsp for 2011 given there are no negative consequences?


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## the-royal-mail (Dec 11, 2009)

It would be my recommendation that you not play around with this. Remember you can carry forward any unused contribution room indefinitely. If you don't contribute the full amount in 2010, you can easily use it in 2011 or any future year. Just hold off on contributing until the time is right for you.


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## CanadianCapitalist (Mar 31, 2009)

twowheeled said:


> I'm curious as to the consequences of using up the allowable $2000/lifetime limit for overcontribution to a rrsp. It seems like something to be taken advantage of since the overcontribution will still be tax sheltered? How does this work?
> 
> Particularly, I want to carry all my allowable 2010 contribution to 2011 because I will be earning a much larger income and need the tax break. Since my taxes aren't too high I will have some extra investment money that I would like to overcontribute into my rrsp for 2011 given there are no negative consequences?


You can always make a contribution in any year and not deduct it for that tax year. The contributions are then carried forward to the next year.

Example:

Make a $2,000 contribution for the 2010 tax year. 
Do not make a RRSP deduction in your 2010 taxes.
The $2,000 RRSP contribution is carried forward to 2011.
Make a $2,000 RRSP contribution for the 2011 tax year.
Make a $4,000 RRSP deduction in your 2011 taxes.


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## HaroldCrump (Jun 10, 2009)

CanadianCapitalist said:


> You can always make a contribution in any year and not deduct it for that tax year. The contributions are then carried forward to the next year.
> 
> Example:
> 
> ...


How do we indicate a situation like this on the federal return?
I see only box 208 - RRSP Deduction.
Is there a box for RRSP Contribution Not Deducted?
Or can we contribute (in your example) $2,000 and it doesn't need to be declared anywhere on the tax return if I don't want to claim it?


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## Sampson (Apr 3, 2009)

HaroldCrump said:


> How do we indicate a situation like this on the federal return?
> I see only box 208 - RRSP Deduction.


Leave this blank. You still have to report your contribution though.


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## HaroldCrump (Jun 10, 2009)

Sampson said:


> Leave this blank. You still have to report your contribution though.


Where, which box #?


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## Sampson (Apr 3, 2009)

Just part of the normal Schedule 7 form.

Box 10-13 should be left blank or enter 0.


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## Guest (Feb 19, 2011)

twowheeled said:


> I'm curious as to the consequences of using up the allowable $2000/lifetime limit for overcontribution to a rrsp. It seems like something to be taken advantage of since the overcontribution will still be tax sheltered? How does this work??


There's no tax deduction for that $2k over-contribution in the year it's made, the deduction can be claimed in future years. And, if the over-contribution exceeds $2,000, you may be assessed a penalty of 1% per month on the excess amount ... note the "may be assessed".

I used the $2K over-contribution to pick up some extra equities but that's about all it's good for as far as I can see ... it's basically some leeway in case of inadvertent overcontribution is my opinion.


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## m3s (Apr 3, 2010)

You can always carry fwd a contribution as long as you have the contribution room, or it's not more than $2000

I took advantage of this for the HBP. I don't think you can really take advantage of it for investing. RRSP is tax neutral including the tax refund, which you don't get in this case until you deduct it. Let's say you never deduct it, well you'd probably have to pay income tax on it anyways when you withdraw!

If your RRSP is maxed, you're probably better to use other tax avoidance methods such as TFSA and Cdn dividends.


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## HaroldCrump (Jun 10, 2009)

Sampson said:


> Just part of the normal Schedule 7 form.
> 
> Box 10-13 should be left blank or enter 0.


Ah, it's a separate form I see.

Thanks.


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## kid5022 (Nov 14, 2010)

well you could still do the $2000 over contribution in 2011
no tax deduction when contributed ie Year 2011
ur investment is tax shelter
when you take it out of RRSP the amount is taxable


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## twowheeled (Jan 15, 2011)

rikk said:


> There's no tax deduction for that $2k over-contribution in the year it's made, the deduction can be claimed in future years. And, if the over-contribution exceeds $2,000, you may be assessed a penalty of 1% per month on the excess amount ... note the "may be assessed".
> 
> I used the $2K over-contribution to pick up some extra equities but that's about all it's good for as far as I can see ... it's basically some leeway in case of inadvertent overcontribution is my opinion.


yes I understand that part.. but my question really is, for someone younger like me who is planning to keep maxing out RRSP's every year anyways, why not simply overcontribute the allowable $2000 and let it compound over the years. It seems like an additional leg up to me since the interest is still sheltered. Even though you can't deduct the amount it seems like a no-brainer to over contribute to the $2000 limit before investing in non-sheltered investments?


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## kid5022 (Nov 14, 2010)

twowheeled said:


> yes I understand that part.. but my question really is, for someone younger like me who is planning to keep maxing out RRSP's every year anyways, why not simply overcontribute the allowable $2000 and let it compound over the years. It seems like an additional leg up to me since the interest is still sheltered. Even though you can't deduct the amount it seems like a no-brainer to over contribute to the $2000 limit before investing in non-sheltered investments?


same here i am planning the same thing
but for it to be worth it u must find a high return investment and it depend on the amount of time u hold on to it
if u withdraw, the amount wont come back


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