# 2 RRSP questions



## lostamonkey (Dec 2, 2014)

I have a few questions about RRSPs:

-If I was to contribution to RRSPs in January 2015, would my contribution limit be my 2014 contribution limit or my 2015 contribution limit?

-Do I have to deduct my contributions in order to withdraw them for the home buyers plan? I am only in the second tax bracket in 2014, and expect to also be in the second bracket in 2015, but I think I will be in a higher bracket in a few years. Say I contributed $25K in early 2015 to an RRSP and withdrew the money in late 2015 for the home buyers plan. Would I still be able to carryforward this deduction and use it when it is more adventageous (say, 2020)? The benefit to this strategy is I would get tax free growth till I decide to purchase a home and I have flexibility when I want to use my deduction. I am already maxing out my TFSAs.


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## Guban (Jul 5, 2011)

I believe that the penalty for over contributing to your RRSP in excess of $2k is calculated as 1% per month until December, so contributing in January should be ok so long as you declare it in your 2013 tax return and will have earned enough room so as to be able to deduct it in 2015 less $2k.

AFAIK you don't have to deduct it to use the HBP. Note that money in an RRSP is tax deferred, not tax free, but i agree that inside of a registered plan is better than outside. 2020 is a long time to defer the deduction. Is the increase in your marginal rate that much better than the compound growth you could have achieved by investing the tax refund? It may be. Just asking.


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## moisimplementmoi (Oct 20, 2014)

if you contribute in January it will be based on Room you have after January 1, 2015 so include the room you get from 2014 income.

as for what you want to do, the Tax free growth vs the forced repayment later- and how this may create cash flow issues doesn't seem to make much sense over one year- especially if you are looking a only one year, which should lead you ta get a really safe investment- so how much will you really be saving, a few hundred dollars? i wouldn't do it.


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## Eclectic12 (Oct 20, 2010)

lostamonkey said:


> ... If I was to contribution to RRSPs in January 2015, would my contribution limit be my 2014 contribution limit or my 2015 contribution limit?


It will be the 2015 contribution limit ... which won't be published until the 2014 tax return is filed and an NOA is received.
You can estimate it ... but there are several factors that could throw the estimate off. Examples include things such as changes to a DB pension plan or earning less income than the previous year.

Bear in mind that the 201x RRSP contribution limit on the NOA is a point in time number that sums what hasn't been used yet and adds in whatever was earned in the previous year. Making a 2014 or Jan 2015 RRSP contribution will reduce the 2015 NOA number received as part of the tax return/NOA.




lostamonkey said:


> ...Do I have to deduct my contributions in order to withdraw them for the home buyers plan? ...


I believe it has to be showed as a contribution and then you are fine as far as the HBP.


Cheers


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## Guban (Jul 5, 2011)

Eclectic12 said:


> *It will be the 2015* contribution limit ... which won't be published until the 2014 tax return is filed and an NOA is received.
> You can estimate it ... but there are several factors that could throw the estimate off. Examples include things such as changes to a DB pension plan or earning less income than the previous year.
> 
> Bear in mind that the 201x RRSP contribution limit on the NOA is a point in time number that sums what hasn't been used yet and adds in whatever was earned in the previous year. *Making a 2014 or Jan 2015 RRSP contribution will reduce the 2015 NOA number received as part of the tax return/NOA.*
> ...


There is no contribution limit shown on the NOA. It is a deduction limit, and a note of unused contributions shown at the bottom.

Normally a contribution in Jan/Feb 2015 is used against the 2014 deduction limit on a 2014 tax return, but as the OP sounds like he/she is maxed out/or isn't planning on using the deduction, it can be used against a future taxable income.

Your last sentence is incorrect in this situation. The RRSP deduction limit is only reduced if it is claimed on the tax return. If the OP does not claim a deduction, but wants to carry it forward, then the contribution will not change the deduction limit.


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## lostamonkey (Dec 2, 2014)

Some additional details:
I am not sure when I will buy a place. It could be 6 months from now or 3 years from now. I cannot justify purchasing a place and selling my investment given the amount I am paying in rent and the purchase price of a comparable place. The local market is overvalued and really favors renters ATM IMO. Most of my investments are in a non registered account which is why I thought about this option. 

I just graduated from university last spring so I am barely in the second bracket (32% in Alberta). I don't think it would be worth it to deduct rrsps this year. I won't be owing much in tax anyway because of my tuition credits.


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