# RRSP contribution limit question



## osc (Oct 17, 2009)

Do capital gains in non-registered accounts increase the RRSP contribution limit? I.e when I'll retire, will I be able to partially transfer non-registered capital gains to RRSP (before age 71) and lower/defer my taxes?


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## FrugalTrader (Oct 13, 2008)

osc, providing you have the RRSP contribution room, you can transfer the whole amount to your RRSP. However, you'll have to pay capital gains tax (if there are capital gains). However, if there is a capital loss, you cannot claim it if you do an in-kind transfer. Best to sell, then transfer cash.


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## bgc_fan (Apr 5, 2009)

osc said:


> Do capital gains in non-registered accounts increase the RRSP contribution limit? I.e when I'll retire, will I be able to partially transfer non-registered capital gains to RRSP (before age 71) and lower/defer my taxes?


Maybe I'm misinterpreting the question, but are you asking if capital gains will add RRSP contribution room? I.e. $1000 in capital gains x 18% = $180 in RRSP room. The answer would be no, as the RRSP room is based on earned income, and capital gains don't count.


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## lb71 (Apr 3, 2009)

bgc_fan said:


> Maybe I'm misinterpreting the question, but are you asking if capital gains will add RRSP contribution room? I.e. $1000 in capital gains x 18% = $180 in RRSP room. The answer would be no, as the RRSP room is based on earned income, and capital gains don't count.


That's how I interpreted it also.


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## OhGreatGuru (May 24, 2009)

Agree with above interpretations. However, you can start moving your non-registered investments into a TFSA (@$5000 per year, dated back to 2009) to shelter them from taxes.


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## CanadianCapitalist (Mar 31, 2009)

OhGreatGuru said:


> Agree with above interpretations. However, you can start moving your non-registered investments into a TFSA (@$5000 per year, dated back to 2009) to shelter them from taxes.


I agree with other posters. Only earned income counts towards creating RRSP room. Capital gains, interest etc. do not.

You should be careful with transferring investments in taxable accounts to a RRSP or TFSA (called an "in-kind" transfer). When you transfer in-kind, it is deemed as a disposition. You might have capital gains and if you do, you have to pay taxes on your gains.

You might have capital losses. But if you do, you can't claim a capital loss on your in-kind transfer.


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## osc (Oct 17, 2009)

Ok, thanks, I was afraid of that. 
By the time I'll retire, I'll have RRSP and TFSA maximized and also an unregistered account. I am planning to first start withdrawing from my unregistered account (by liquidating positions) in order to optimize the taxes over the long term. I was hoping that the capital gains in the unregistered account would create additional contribution room in RRSP, which would had further reduced my taxes. 
Of course, I'll continue to add $5k/year to TFSA after retirement. TFSA is scheduled to be the last one liquidated.


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## sprocket1200 (Aug 21, 2009)

unless you want to pay more tax than necessary, better rethink the TFSA is last strategy...


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## cannon_fodder (Apr 3, 2009)

What happens if you are a daytrader where your income from capital gains is actually taxed as earned income? Would you then use your collective capital gains, interest and dividend income as earned income thus providing for RRSP contribution room?


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## FrugalTrader (Oct 13, 2008)

Canon, if you are a day trader, then your trades will be considered business income which also means that you can claim expenses. Providing that the business is unincorporated, I would assume that it would increase RRSP contribution room.


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