Author Topic: Can I still take an RRSP deduction?  (Read 996 times)

pistacchio

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Can I still take an RRSP deduction?
« on: April 08, 2021, 09:43:54 AM »
Hello!

Wanted to clear up this scenario...thank you kindly.

Individual made a $5,000 contribution to his RRSP in 2018. He had the room to do it.

Individual never took the deduction in anticipation of higher income years ahead.

In 2020, individual took out the $5,000 and had a T4RSP/including in income.

Question: can the individual still take the $5,000 deduction from the original contribution (remember, he never took). Or did the withdrawal ruin it for him.

Thank you.


Lews Therin

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Re: Can I still take an RRSP deduction?
« Reply #1 on: April 08, 2021, 10:29:11 AM »
Contribution is always available. You'll be taxed on that 5k you took out.

In other words, each operation is completely separate from each other. You could also take the contribution to cover the income of that 5k, rendering the whole thing moot.

pistacchio

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Re: Can I still take an RRSP deduction?
« Reply #2 on: April 08, 2021, 12:27:10 PM »
Thank you Lews Therin. Must I file a form T746? The wording suggests so.

https://www.canada.ca/content/dam/cra-arc/formspubs/pbg/t746/t746-20e.pdf

Lews Therin

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Re: Can I still take an RRSP deduction?
« Reply #3 on: April 08, 2021, 12:33:28 PM »
I don't know, I use simpletax ; so I don't see the actual forms. you could post it in the Canadian tax discussion thread, there's a ask an accountant thread.

CanEh Tax thread, you have questions, I have answers.

Goldielocks

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Re: Can I still take an RRSP deduction?
« Reply #4 on: April 16, 2021, 02:11:38 PM »
For 2018 year, the $5k contribution should have been reported on a RRSP form and entered into the tax return.
You can make contributions and not claim the tax deduction for that year - you are allowed to carry it over for future.

Then in 2020 the $5k withdrawal and T4RSP form will be taxed.   The individual could claim the so far unused 2018 contribution on the 2020 taxes.  "Do you have any unused contributions from previous years?" = "yes" on most tax software.

This results in a wash for income in 2020, but also reduces the future RRSP room available by that $5k. 

It looks like form T746 does the same thing, and it might also give you back your RRSP room, but it also might incur additional taxes for the amount above $2000 (the amount listed on line 4, according to the form's notes).   You need to research this one a bit more.