# Spousal RRSP rules for income splitting



## mike78 (Sep 9, 2011)

Hi,
previous threads have discussed the rules for using a spousal RRSP for income splitting when the spouse is in a lower tax bracket. Currently my spouse is not working, and I haven't made any contributions in the previous two calender years to the spousal RRSP. Therefore I'm planning on withdrawing the full amount this year and it will be taxed as income to my spouse. My questions are:
1. Can I make a new contribution in Jan/Feb 2012 to the spousal RRSP and claim that on my 2011 tax return, or do I need to wait for my 2012 tax return?

2. Do I need to be careful how the money my spouse withdraws is spent? Is it OK for my spouse to simply withdraw the money in Dec of this year then for me to put the same money back into the spousal RRSP in Jan/Feb of next year, or does there need to be some separation of the money?

Thanks!!
Mike


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## Charlie (May 20, 2011)

I think your plan works.

Essentially -- the funds come in and out of the spousal RRSP (straddling a calendar year) -- and you're ahead by the difference in your marginal rates. At a cost of the use of contribution room.

You'd have to make sure the contribution happened in the calendar year following the withdrawal -- though you could deduct it in 2011 if made in the first 60 days. I'd also watch the effect on child tax benefits and the like which may reduce your benefit. 

There's no CRA restriction on how your spouse uses the money. That's between the two of you .

I'm unsure how much I like this plan. I suppose it's good if you've no intention of using the lost RRSP room and there wasn't much of a loss of CCTB's etc. Someone would have to do the math. But interesting nonetheless. I tend to prefer to use RRSP's as long term planning rather then short term wiggles.


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## OhGreatGuru (May 24, 2009)

mike78 said:


> ...
> 2. ... Is it OK for my spouse to simply withdraw the money in Dec of this year then for me to put the same money back into the spousal RRSP in Jan/Feb of next year, or does there need to be some separation of the money?


If you aren't planning to spend the money you take out, why do it? You do realize that you permanently lose the RRSP room when you withdraw the money don't you?


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## mike78 (Sep 9, 2011)

Thanks for the replies. I hadn't thought about the potential loss of child tax benefits, I'll have to do the math on that. I have plenty of unused RRSP contribution room, and I don't think I'll ever use it all, so that's not a problem either.

To answer OhGreatGuru question the reason to do it is to pay less tax!  My wife will have pay a little bit of tax on the income. The withdrawl is only ~$13k, so not much tax to pay there since she doesn't earn any other income. Meanwhile I'll get to reduce my taxable income by $13k, which should save about $5k in taxes. I won't be able to make use of my wifes basic allowance, so more math to do there too. I've read that people repeat this plan every 3rd year until they retire.


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## jmalias (Aug 10, 2010)

*spousal plan - details*

My plan below.. I have one cra agent verified that is ok, but I will make a second call to verify.

My wife regularly earns in the 30k's, I earn over 100k's. I put in 30k in spousal RRSP, wait 2 calendar years, then top up her pay to the 43k mark for a few years. (rinse and repeat)

This year, her RRSP withdrawal is happening Dec16th 2011, My spousal RRSP deposit with be Jan-Feb 2012. Both transactions will be applied on our 2011 tax forms.

I usually wait one tax year between the transactions, but this time I am putting them together.

The cra wording is withdrawal and deposit must be in different calendar years. Much like it requires 2 full calendar years (not tax years) for withdrawals to be applied to spouse. So after my feb 2012 deposit, two full calendar years actually makes it 3 tax years. 

Any one have 3-4 cents to contribute to my plan success or failure.

(side note: my DB pension will be split and with other income at retirement time will make my wife's income more when she retires than now)

Also, it allows us to move investments in my name to her name, to build her dividend generating investments, saving +20% taxes, without breaking cra rules. This was much more important before pension splitting, now it just make sense to save 20% now, just wish TFSA room was bigger.


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## ams75 (Jan 31, 2017)

I am looking to do the same thing this year. Any comments on if you had any issues would be welcome!



jmalias said:


> My plan below.. I have one cra agent verified that is ok, but I will make a second call to verify.
> 
> 
> This year, her RRSP withdrawal is happening Dec16th 2011, My spousal RRSP deposit with be Jan-Feb 2012. Both transactions will be applied on our 2011 tax forms.
> ...


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## Mukhang pera (Feb 26, 2016)

ams75 said:


> I am looking to do the same thing this year. Any comments on if you had any issues would be welcome!


Well, ams75, I would not hold my breath waiting for comments from jmalias. His post is more than 5 years old and he has not been on the forum since.


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