# Can I put $10,000 in RRSP in Feb and withdraw in March?



## Pennypincher (Dec 3, 2012)

I made a good income in 2012 over $70,000. I have about $10,000 in RRSP room that I have not contributed to yet.

I don't know for sure if I am doing this, but I am wondering what if:

I get a loan of $10,000 from the bank and put it into an RRSP in February and get a deduction against my 2012 income.
Then I withdraw the RRSP after the march "2012 RRSP deadline" with the 15% with-holding tax and get $8,500 or whatever and promptly pay the bank back.
Can I do that?

I am contemplating doing it because I might quit my job and stay home with the kids starting in April. My income could then be at a much lower level - say $16,000 for the year + the $10,000 RRSP. I have decent daycare expenses to bring the income down again by around $10,000 - so $16,000 taxable income.

Aside from any of the other issues around this scenario, is there any reason the CRA would prevent me from doing this, or penalize me other than the withholding tax?


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## jamesbe (May 8, 2010)

You also lose that contribution room in the future.


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## Pennypincher (Dec 3, 2012)

hmm good point that I didn't think about. I definitely plan on going back to work in a few years.


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## stardancer (Apr 26, 2009)

If you decide to do this, check with the RSP issuer; they always have a holding period before you can withdraw, around 90 days.

You say you are contemplating quitting your job. It's not a firm decision yet. Why saddle yourself with a loan if your income will be going down?

Or contribute to bring your taxable income down, but don't withdraw until you are sure of quitting. It would mean making loan payments in the meantime.

As mentioned, you lose the contribution room. If you use up all your room, then it will take you a while to build it back up once you do go back to work.

Also note that daycare expenses up until April (when you quit your job) will be eligible for the child care expense deduction, but nothing beyond that point.


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## Pennypincher (Dec 3, 2012)

Thanks Stardancer. I highly doubt I will be doing this, but I was curious if it was possible. I was thinking there probably was that 90 day or so holding rule at the bank.

I wouldn't actually need to borrow the $10,000, but if I could pay it back right away, why not. I could also use some of my liquid assets for the contribution. 

I realize that I could only claim daycare up to the point where I was working. Daycare costs me $2,500/month so I could reach $10,000 in those 4 months. CRA only allows $7000/per child/year deduction which is unfortunate as I can get to the max in 5 and a half months of daycare. See why I would want to quit in April or May? 

Basically I am considering quitting my job. So I was brainstorming tax ideas for this unusual situation I will be in where I will have no income for half a year and the following year beyond.


Wasting $10,000 of RRSP room is unfortunate though. But it's only a waste in terms of not having saved that RRSP for future retirement income like it was intended. 
Thanks for your help!


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## OptsyEagle (Nov 29, 2009)

I have never heard of a required holding period for RRSPs. There is a 90 day period, where the money must be in an RRSP to use a homebuyers plan withdrawal, but in this case, he/she can contribute it one day and withdraw it the next and their plan would rollout just fine.

You know about the withholding tax. I will point out that in the tax brackets you listed we are talking about a net gain of about $1,000 plus or minus a little depending on your province of residence. Keep in mind however that this net gain comes from big positive gains and small negative losses that will come in different tax years, so you would need to juggle this. And as well, there is that loss of contribution room you have to factor in.


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## MoneyGal (Apr 24, 2009)

FWIW you get the same deductibility for childcare costs as you do for RRSP contributions, so depending on how you time your childcare/workforce exit, you can have your tax position for 2013 exactly the same as if you followed the RRSP contribution/withdrawal tactic you outlined in the first post, without executing that tactic. Make sense?


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## MoneyGal (Apr 24, 2009)

Whoops, duh. Of course you want to take the deduction against 2012 income. No other way than with the "first 60 days" RRSP contribution rule. :tongue-new:


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## Pennypincher (Dec 3, 2012)

thanks again!


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