# Stay at home mom has income this year. She claims the income, who should buy RRSP?



## recklessrick (Jun 16, 2013)

Hi there.

Two questions:

1) When she claims the additional 9000 income along with the child tax benefit of 2400, her 2014 income will be $11400. Will she pay tax on that or is it under the personal exception, which it seems like it should be both nationally and in Saskatchewan. (http://www.nethris.com/en/resources/legislation/personal-tax-credits.php)

2) Should she claim an RRSP purchase (she has room) for her extra 9000 income or should I? I would think she should just claim it as income and then I can buy 9000 worth of RRSP in my name (I have room) and it becomes a wash? *What would be the best way to handle this extra 9000?* I want to buy RRSP with it. 

She is a dependent on my income tax file as well, not sure what happens to the personal exemption. Does it get rolled into mine?

Note: The income came from the sale of a farm animal, if that matters. It's not like we sold a car or something. We will be getting a check from a corporation for the amount of the sale minus fees.


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## OptsyEagle (Nov 29, 2009)

I doubt there would be any benefit in her making an RRSP deduction. She is pretty much under the personal exemption. The unfortunate part is her husband will lose all of his married exemption and therefore pay about 20% tax on her income. In any event, an RRSP contribution will not stop that from happening, so I suspect an RRSP with him as the contributor would make a better idea but I don't have his income numbers to be sure. You can always use a spousal RRSP so that the money goes into her name but the tax deduction can be done by the spouse.


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## recklessrick (Jun 16, 2013)

The husband income (mine) will be right around 100k. I will also be buying about 20k in RRSP (I have lots of room). This 9000 would be an addition to my planned 20k contribution. Yes, she has a spousal account that I do contribute to with my room so that's what I would do. Too bad about that 20% though...

Also, *would there be any benefit to my claiming it as income*? The check could be made out to me, makes no difference. I would think I'd end up just paying a higher tax rate on it but I'd still get to keep her married exception room? Is that maybe 6 of one and half a dozen of another?


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## OptsyEagle (Nov 29, 2009)

No, that would be a lot worse. About twice the tax would be paid if you earned it.


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## recklessrick (Jun 16, 2013)

Haha, noted!


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## Plugging Along (Jan 3, 2011)

My understanding is if you are already contributing to your own rrsp and a spousal rrsp, then you can not claim her rrsp. If the rrsp contribution comes from her amount then she claims it.


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## recklessrick (Jun 16, 2013)

That's what I understand as well.


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## Guban (Jul 5, 2011)

recklessrick said:


> The husband income (mine) will be right around 100k. I will also be buying about 20k in RRSP (I have lots of room). This 9000 would be an addition to my planned 20k contribution. Yes, she has a spousal account that I do contribute to with my room so that's what I would do. Too bad about that 20% though...
> 
> Also, *would there be any benefit to my claiming it as income*? The check could be made out to me, makes no difference. I would think I'd end up just paying a higher tax rate on it but I'd still get to keep her married exception room? Is that maybe 6 of one and half a dozen of another?


I don't have any experience with the sale of a farm animal, but here's my two cents ...

Whose animal was it anyways? The owner needs to declare the income. It is not a matter of which situation is better. Is this a business or something? Are there deductions that should be taken to offset the cheque amount? Any farmers out there that can answer?

Having said all that, it would clearly better to have the income in your wife's name, as she has the lower marginal tax rate. She is taxed at 15% federally, while you are taxed at 26% federally. Therefore a savings of 11% federally, plus the provincial amount.


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## recklessrick (Jun 16, 2013)

Thanks for the info. I ran some scenarios in studio tax 2013 which we used for our taxes. It was about a 10% better return if she claimed the income and I claimed the same amount in RRSP purchases. There is the ~11% you spoke of. It's her animal, not a business, family farm. There will be deductions associated with the auction and transport, yes. I ran a bunch of scenarios in studiotax and this was the best one. Lines up with what I've been hearing on the forums. Thanks again for the info.


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## OptsyEagle (Nov 29, 2009)

Did you declare the sale as income or as a capital gain. You may need to do some further research but a capital gain might reduce the tax load considerably. Not on her tax return, since she will owe no tax in either case but it might allow you to qualify for more spousal credit. Should get you another $900 in tax savings.

Not sure if she can claim it as a capital gain but I would be looking into it if it was my wife. If it was a grey area, like I suspect it is, that's where I would declare it...but that is just the way I am.


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