Author Topic: RRSP spousal account planning.  (Read 2889 times)

Islander

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RRSP spousal account planning.
« on: August 06, 2020, 04:30:54 AM »
Hello, My husband brings in about 50k annually and my income is 0 as Iam a homemaker. We both have quite a significant amount of unused RRSP.

For the following tax year we are looking to maximize our RRSP contribution to maximize our CCTB.

A couple questions.

1) Who opens the spousal RRSP? Does my husband set it up in his account under my name for me?

2) Do people generally deposit RRSP contributions throughout the year? Or is it only allowed the first 2 months of the year?

3) Is it wise to contribute the same amount into each spouse RRSP account?


Thanks for your insight.

Metalcat

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Re: RRSP spousal account planning.
« Reply #1 on: August 06, 2020, 06:33:27 AM »
Hello, My husband brings in about 50k annually and my income is 0 as Iam a homemaker. We both have quite a significant amount of unused RRSP.

For the following tax year we are looking to maximize our RRSP contribution to maximize our CCTB.

A couple questions.

1) Who opens the spousal RRSP? Does my husband set it up in his account under my name for me?
-I believe so, although I haven't done it, but you could easily get help from someone at your financial institution for this if Google isn't able to answer it for you. Regardless, it should be complicated.

2) Do people generally deposit RRSP contributions throughout the year? Or is it only allowed the first 2 months of the year?
-The first two months of the year is the very *last* chance to contribute for the year before, not the only time to contribute.

3) Is it wise to contribute the same amount into each spouse RRSP account?
-You should really read up on how RRSPs work, because whether or not you should contribute to an RRSP all depends on what your expected tax bracket is when you retire. With his income of 50K, that's not a very high tax bracket, so deferring your taxes may actually lose you money depending on how much you expect to save for retirement.

There are a bunch of great online calculators that can help you figure this out, or again, even someone at the bank could take a few minutes and help you figure it out.


Thanks for your insight.

utaca

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Re: RRSP spousal account planning.
« Reply #2 on: August 06, 2020, 08:43:43 AM »
Hello, My husband brings in about 50k annually and my income is 0 as Iam a homemaker. We both have quite a significant amount of unused RRSP.

For the following tax year we are looking to maximize our RRSP contribution to maximize our CCTB.

A couple questions.

1) Who opens the spousal RRSP? Does my husband set it up in his account under my name for me?
No - I set one up for my spouse in Questrade. It is in her account (listed along with her RRSP and TFSA).

2) Do people generally deposit RRSP contributions throughout the year? Or is it only allowed the first 2 months of the year?
No, you can typically deposit RRSPs from March 1 - March 1 of the next year. So for 2018, you could make deposits from March 1, 2018 - Feb 28, 2019 (or thereabouts). This year, I think contribution deadlines may have been extended due to Covid.

3) Is it wise to contribute the same amount into each spouse RRSP account?
Depends - for example, if one spouse has a pension and the other does not, put more into the RRSP of the spouse without the pension.

Thanks for your insight.

Metalcat

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Re: RRSP spousal account planning.
« Reply #3 on: August 06, 2020, 08:46:25 AM »
The tax deadline for 2019 was extended, but not the RRSP deadline, because the RRSP deadline happened before any impact of covid occured.

Mighty Eyebrows

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Re: RRSP spousal account planning.
« Reply #4 on: August 06, 2020, 12:21:16 PM »

Islander

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Re: RRSP spousal account planning.
« Reply #5 on: August 07, 2020, 06:33:28 AM »
Thank you for all the responses.

Can someone help me clarify if my understanding and calculations are correct?

We are planning on contributing the full 18% of my husbands allowed amount. Of 50k that would be 9k, into his RRSP account. Does this mean he can also contribute 18% of his income to my spousal RRSP account as well? Total 18k contribution?

We are trying to bring our family net income down to 30k. SO after the allowed 18% can we use our personal deductable from previous years to bring it down further? The reasoning is to take advantage of the maximum CCTB which I believe is maximised around 30k family income?

Is there anything Iam missing or need to also consider?

Thanks in advance.
« Last Edit: August 07, 2020, 06:41:39 AM by Islander »

Metalcat

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Re: RRSP spousal account planning.
« Reply #6 on: August 07, 2020, 07:01:56 AM »
Thank you for all the responses.

Can someone help me clarify if my understanding and calculations are correct?

We are planning on contributing the full 18% of my husbands allowed amount. Of 50k that would be 9k, into his RRSP account. Does this mean he can also contribute 18% of his income to my spousal RRSP account as well? Total 18k contribution?

We are trying to bring our family net income down to 30k. SO after the allowed 18% can we use our personal deductable from previous years to bring it down further? The reasoning is to take advantage of the maximum CCTB which I believe is maximised around 30k family income?

Is there anything Iam missing or need to also consider?

Thanks in advance.

I think I'm a little confused by what you are asking.
When he contributes to a spousal RRSP for you, it doesn't use up your contribution space, he can only use his own contribution space and put it in your name.

So no, he can't double his deductions. The math is exactly the same pre-retirement. A spousal RRSP only has an impact on your taxes in retirement by splitting your retirement income.

So say one person works and saves a million in RRSPs. If they've put half into a spousal RRSP, then each person will be taxed on 20K of retirement income instead of one person being taxed on 40K.

Their maximum deductions and taxes before retiring would be identical whether they did spousal or single all along.

Islander

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Re: RRSP spousal account planning.
« Reply #7 on: August 07, 2020, 07:58:18 AM »
Okay, I think I understand a little better...

So if 18% of 50k is 9k. He can put $4500 is his rrsp and $4500 in mine? That would be allowed, correct?

The second part, we both have deductions from previous years that we never used. I would have to open my own rrsp to contribute, correct? So that it takes away from my deductions.

Hah, Iam actually quite confused.
« Last Edit: August 07, 2020, 08:03:26 AM by Islander »

Metalcat

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Re: RRSP spousal account planning.
« Reply #8 on: August 07, 2020, 08:58:44 AM »
Okay, I think I understand a little better...

So if 18% of 50k is 9k. He can put $4500 is his rrsp and $4500 in mine? That would be allowed, correct?

The second part, we both have deductions from previous years that we never used. I would have to open my own rrsp to contribute, correct? So that it takes away from my deductions.

Hah, Iam actually quite confused.

First part, yes, I believe he can put however much he wants of his max to yours or his, it doesn't have to be evenly split. How he splits it will depend on what your taxable retirement incomes will look like.

His max includes whatever previously unused space he has leftover, your max includes whatever space you have left over, but you can't share that space. Whatever space he has makes up the max that he can contribute to and claim, whether he puts it in his name or your name. No if he has 10K in space leftover from last year, his max this year is 19K and he can split that in your name and his name however makes sense.

If you have 10K of space left over, his contribution to a spousal RRSP has no impact on that space. Your space just sits there essentially useless until you make enough to use it. I have over 100K in RRSP space that I can't use right now because I'm not working, even though we have extra money.

Mighty Eyebrows

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Re: RRSP spousal account planning.
« Reply #9 on: August 07, 2020, 05:00:53 PM »
Hah, Iam actually quite confused.
You should read the Finiki article I linked above very carefully. Some of this repeats what Malcat has said already.

There are 3 different accounts here:

1) His RRSP.

2) Your RRSP. He cannot contribute to this.

3) The spousal RRSP. I will shorten this to SRRSP and assume it is to benefit you.

For the SRRSP, the amount he can contribute comes from the same allowance/room as for his own RRSP. Also, he gets the tax deduction against his income, not you. However, this money becomes yours, not his. Although you have to be careful not to pull it out within 3 years of him contributing it (read the articles for more details).

In both cases, he can contribute up to whatever room he has accumulated from prior years. The 18% additional room will only come into play for the year following the income (except for some special pension cases).

As a simple example, say he has 10,000 of RRSP room built up. He can put the 10k into his RRSP and/or the SRRSP, but not go over the total 10k all together. He does not have to claim all of the tax deduction in this year, if you think some of it will be useful in a future year. This lets the full 10k grow tax-free, even when you don't need the full amount to reduce your income right away.

As long as you will be in the same income bracket (or lower) when retired, the RRSP has the same benefit of tax-shielded accumulation as the TFSA. For anyone skeptical about that, just think about the commutativity of multiplication a little:

TFSA: [(Income) * (1 - tax rate)] * (Growth over time)
RRSP: [(Income) * (Growth over time)] * (1 - tax rate)


Edit to add: With your own very low (or zero) income, I would make sure you use your TFSA before your own RRSP. Only once your TFSA is full should you think about using your own RRSP room. The RRSP is only useful if you will eventually have some income to set it against.
« Last Edit: August 07, 2020, 05:31:47 PM by Mighty Eyebrows »

Heckler

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Re: RRSP spousal account planning.
« Reply #10 on: August 07, 2020, 10:09:27 PM »
« Last Edit: August 07, 2020, 10:11:19 PM by Heckler »

Metalcat

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Re: RRSP spousal account planning.
« Reply #11 on: August 08, 2020, 04:16:42 AM »
Here are some good general resources you may want to read:

https://www.finiki.org/wiki/Registered_Retirement_Savings_Plan

https://www.taxtips.ca/rrsp/spousal-rrsp-rrif.htm

This.


And at 50k family income, you should consider maxing your TFSAs first.

https://www.taxtips.ca/tfsa/tfsavsrrsp.htm

I was going to suggest this, but OP was talking about some benefit maxing out at 30K taxable income. That would have to be balanced out in the equation.

Islander

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Re: RRSP spousal account planning.
« Reply #12 on: August 08, 2020, 09:58:59 AM »
Hah, Iam actually quite confused.
Edit to add: With your own very low (or zero) income, I would make sure you use your TFSA before your own RRSP. Only once your TFSA is full should you think about using your own RRSP room. The RRSP is only useful if you will eventually have some income to set it against.

Thank you once again for the responses.

Yes, our TFSA are maxed out. I believe RRSP is useful to maximize the CCTB which is the top reason Iam looking into contributing into it. Could you please explain what you mean by it is only useful if I eventually have income to set it against? I would love more clarification. I dont foresee myself making much in the future as I don't have much education past college. Sad to say, but atleast our finances are some what in order and we are managing.  I was planning to go back to part time work but because of this pandemic happening I might have to start home schooling the kids.
« Last Edit: August 08, 2020, 10:32:43 AM by Islander »

Mighty Eyebrows

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Re: RRSP spousal account planning.
« Reply #13 on: August 08, 2020, 10:31:11 AM »
Yes, our TFSA are maxed out. I believe RRSP is useful to maximize the CCTB which is the top reason Iam looking into contributing into it. Could you please explain what you mean by it is only useful if I eventually have income to set it against? I would love more clarification. I dont foresee myself making much in the future as I don't have much education past college. Sad to say, but atleast our finances are some what in order and we are managing.

Well-done on filling your TFSAs! Especially on a very basic income.

As you have probably figured out, when your husband contributes to his RRSP (or your SRRSP), that amount can be taken off of his "taxable income" when he files his taxes. It is as if he never earned the money (for tax purposes). When he/you take(s) the money out in retirement, it is added to his/your income then, and taxed at whatever rate you are paying then. It is "shifting" the income to a later part of your life.

Using his RRSP or your spousal RRSP to bring your family income below the 30k threshold for CCTB sounds like a sensible plan.

In your case, without any taxable income of your own, contributing to your RRSP wont change your taxes in this year. You have nothing to "shift". If you have some income in 5 years, you can use a contribution today against the income then (you can store the credit until needed). However, remember that it will be taxed when it is taken out, so you want to have cancelled some year's tax before then!

So yes, your husband can use his RRSP and a spousal RRSP to lower your family income, but your own RRSP should only be used if you think you will be up into the first tax bracket some day (above the personal allowance).

There may be more clever RRSP planning that is possible, but make sure you are comfortable with the basics before worrying about that.
« Last Edit: August 08, 2020, 10:33:16 AM by Mighty Eyebrows »

Mighty Eyebrows

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Re: RRSP spousal account planning.
« Reply #14 on: August 08, 2020, 10:39:34 AM »
For others reading this thread, here is the CRA page about carrying forward unused contributions (as opposed to carrying forward unused contribution room):

https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/rrsps-related-plans/contributing-a-rrsp-prpp/what-unused-rrsp-prpp-contributions.html

I was unclear on this until a year ago, so I suspect others might be too.

Islander

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Re: RRSP spousal account planning.
« Reply #15 on: August 08, 2020, 10:40:04 AM »
If I read and understood correctly, Nothing I contribute will have benefit in lowering our family income? I assumed that even though I don't have current income I do have unused deductions from previous years. Could I not use the previous years of deduction limit to bring down our family income? Maybe this is where I might be to confused?

We can only use my husband's 18% limit and his previous years unused limit to lower our family income?

Is splitting the contributions 50/50 between his rrsp and my srrsp the right thing to do? My thinking is that when it comes to withdrawing in our retirement it would be less tax? As oppose to all the funds in his rrsp?

Thanks for all your patience in helping me understand. I have read numerous rrsp articles but I just can't seem to grasp the concept! TFSA is so much more straight forward. It took me over a year to finally understand anything about investing and the stock market. Thank goodness the all in 1 fund (vgro) was introduced about the same time I started my investment journey. Math has always been my weakest. Please someone just tell me what to do, lol.
« Last Edit: August 08, 2020, 11:00:03 AM by Islander »

Heckler

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Re: RRSP spousal account planning.
« Reply #16 on: August 08, 2020, 11:40:54 AM »
Please someone just tell me what to do, lol.

This is tough to do without more details about your family finances, past current and future.  You should know however, that whatever you do to save $, you are doing better than most out there!


Quote
We can only use my husband's 18% limit and his previous years unused limit to lower our family income?
With 50k/year and "lots of room" as you say, he likely has much more RRSP room than the 9k accumulated this past year.  Remember that RRSP contribution room adds up if you don't use it fully - last years tax return shows your current limits. 
 
Quote
Is splitting the contributions 50/50 between his rrsp and my srrsp the right thing to do? My thinking is that when it comes to withdrawing in our retirement it would be less tax? As oppose to all the funds in his rrsp?
The goal with S-RRSP accounts is to equalize future income from each of the couples total registered accounts.   So, his RRSP and pension total amount should equal your RRSP and Spousal RRSP total amounts when you both start withdrawing and equal amount of income from them.


If you don't have income this year, you can't reduce your income as you're already at 0.  Only he can reduce his income, but if he has 50k or more contribution room added up over 20 years, then he can contribute all of his 50k this year and you both have 0 income, 0 income tax.  But this isn't feasible, you need to feed the kids!

« Last Edit: August 08, 2020, 11:54:09 AM by Heckler »

Islander

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Re: RRSP spousal account planning.
« Reply #17 on: August 08, 2020, 01:26:24 PM »
Thank you! I think I have hit a spot where I may start needing financial planning from an advisor. Does anyone know of a local fee only advisor? Iam located in Vancouver, BC.

Perhaps for the time being I will set up an appointment with a TD bank advisor and see what knowledge I can aquire from there. I literally need someone to hold my hand and draw me some pictures, Haha!

Metalcat

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Re: RRSP spousal account planning.
« Reply #18 on: August 08, 2020, 02:26:10 PM »
Thank you! I think I have hit a spot where I may start needing financial planning from an advisor. Does anyone know of a local fee only advisor? Iam located in Vancouver, BC.

Perhaps for the time being I will set up an appointment with a TD bank advisor and see what knowledge I can aquire from there. I literally need someone to hold my hand and draw me some pictures, Haha!

Well, first, let's clarify that to be a "financial advisor" is to be someone who is licensed to sell investment funds. There are A LOT of advisors who know very very little about optimal tax planning.

I myself took the entire training to become a financial advisor just because I wanted to better understand, and it taught very, very little of practical use for my own finances. It *only* taught me what I needed to know to sell mutual funds. That's it.

FTR, I have never sold mutual funds and never will. However, when I tell people I took the course, they immediately assume I'm an expert on personal finance. I'm not.

If it's a question of how to manage your tax deferred accounts, an accountant is who I personally would and do ask. However, the services of financial advisors at the bank are typically free, and many of them are quite knowledgeable, so you could start there and see if you get the advice you need. If not, consider talking to an accountant maybe.

Also, to address your earlier question, there is no such thing as family or household income. I think that's why you are so confused. You aren't even legally allowed to use each other's incomes to fill those accounts. Meaning, if you wanted to use some of your husband's income to fill your RRSPs for some reason, as I understand it, he would have to loan you the money with interest.

I had this situation myself where DH had years of unused space and I started my career very high income and I assumed we could use his space to offset my taxes. NOPE!
That's when I found out that we could even get in trouble for me using my money to fill his RRSP space.

I was like "but we have combined finances, how would they be able to tell?" and I was told that in our case, it probably wouldn't be an issue because DH's income was large enough for it to make sense that he could have used his income for it, but if he had stopped working, like you have, then it would be obvious that I was using my money to fill his account, and apparently that's not allowed.

Now, I don't trust *anything* a financial advisor tells me anymore without verifying it. So that may not be accurate, I've never had a need to verify it, but that's what a top, very expensive, very respected FA told me.

It makes no sense to me that income is treated this way when in divorce it's by default treated as household, but the tax guys don't give a flying F about what the family law folks are up to, so it doesn't matter.

Honestly, and I speak from experience here, the advice that you can get, even the advice you pay for, is practically useless until you really understand this stuff for yourself.

It's hard to even get good advice until you are literate enough with the material to be able to ask the right questions. The good news is, it really doesn't take very long to learn it, and there are endless sources of info available.

A single afternoon of googling and reading should get you to a level where you can very adeptly know how to ask exactly the right questions to be able to get meaningful answers when you seek professional advice.

« Last Edit: August 08, 2020, 02:36:16 PM by Malcat »

Mighty Eyebrows

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Re: RRSP spousal account planning.
« Reply #19 on: August 08, 2020, 04:35:41 PM »
It's hard to even get good advice until you are literate enough with the material to be able to ask the right questions. The good news is, it really doesn't take very long to learn it, and there are endless sources of info available.

This is the best advice. Take your time and work through all the info you can find. Don't talk yourself down, whether you think you are a "math person" or not. Remember, most of the other people who understand this stuff just had to go learn it the same way.


Mighty Eyebrows

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Re: RRSP spousal account planning.
« Reply #20 on: August 08, 2020, 04:43:20 PM »
Also, to address your earlier question, there is no such thing as family or household income.

There is a problem with terminology that catches some people. Malcat is right that each individual is taxed and it not as a family. However, for some credits like your CCTB, they look at your combined income ("family income") to see if you are eligible. However, since your income is already zero, you can't reduce your side of the "family income" any lower than it already is, using your RRSP.

Spouses can transfer some credits back and forth (like unused personal allowance or unused tuition), but in general the two sides are treated separately for tax purposes.


Seahorse

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Re: RRSP spousal account planning.
« Reply #21 on: August 08, 2020, 05:26:40 PM »
Spousal RRSP is only good for income splitting after retirement. There's hardly other benefit to it.

A and B are spouses.
A has $30,000 limit, B has $25,000.
A is working, B is not.
A's income is $60K. B has no income other than CCTB.

B can create a spousal RRSP, that A can contribute to. B cannot contribute to it. Only spouse of B can contribute to it.

Any money that A contributes will taken out of A's limit. B's limit remain intact. Only A can deduct this amount while filing tax. Not B.

A cannot withdraw the amount in that they contributed to B's spousal RRSP. Only B can. All RRSP withdrawal rules apply.

[Edited]
Let's come back to income splitting. If A gets pension or is in higher income bracket after retirement, then any RSSP withdrawal will increase income and therefor increase taxes paid. If B has no income or very less income after retirement, this is where spousal RRSP comes into picture. B's spousal RRSP can now be withdrawn preferably below taxable limit without any income tax or at a low marginal income tax rate.
« Last Edit: August 10, 2020, 10:37:10 AM by Seahorse »

Mighty Eyebrows

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Re: RRSP spousal account planning.
« Reply #22 on: August 08, 2020, 05:52:53 PM »
A and B are spouses.
You might want to check your A's and B's in the last paragraph.

(Edit: Fixed now.)
« Last Edit: August 10, 2020, 12:45:41 PM by Mighty Eyebrows »

Metalcat

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Re: RRSP spousal account planning.
« Reply #23 on: August 08, 2020, 06:53:04 PM »
A and B are spouses.
You might want to check your A's and B's in the last paragraph.

Yeah...I know the rules and I got really confused by that.

The Fake Cheap

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Re: RRSP spousal account planning.
« Reply #24 on: August 09, 2020, 07:10:57 AM »
Thank you! I think I have hit a spot where I may start needing financial planning from an advisor. Does anyone know of a local fee only advisor? Iam located in Vancouver, BC.

Perhaps for the time being I will set up an appointment with a TD bank advisor and see what knowledge I can aquire from there. I literally need someone to hold my hand and draw me some pictures, Haha!

Well, first, let's clarify that to be a "financial advisor" is to be someone who is licensed to sell investment funds. There are A LOT of advisors who know very very little about optimal tax planning.

I myself took the entire training to become a financial advisor just because I wanted to better understand, and it taught very, very little of practical use for my own finances. It *only* taught me what I needed to know to sell mutual funds. That's it.

FTR, I have never sold mutual funds and never will. However, when I tell people I took the course, they immediately assume I'm an expert on personal finance. I'm not.

If it's a question of how to manage your tax deferred accounts, an accountant is who I personally would and do ask. However, the services of financial advisors at the bank are typically free, and many of them are quite knowledgeable, so you could start there and see if you get the advice you need. If not, consider talking to an accountant maybe.

Also, to address your earlier question, there is no such thing as family or household income. I think that's why you are so confused. You aren't even legally allowed to use each other's incomes to fill those accounts. Meaning, if you wanted to use some of your husband's income to fill your RRSPs for some reason, as I understand it, he would have to loan you the money with interest.

I had this situation myself where DH had years of unused space and I started my career very high income and I assumed we could use his space to offset my taxes. NOPE!
That's when I found out that we could even get in trouble for me using my money to fill his RRSP space.

I was like "but we have combined finances, how would they be able to tell?" and I was told that in our case, it probably wouldn't be an issue because DH's income was large enough for it to make sense that he could have used his income for it, but if he had stopped working, like you have, then it would be obvious that I was using my money to fill his account, and apparently that's not allowed.

Now, I don't trust *anything* a financial advisor tells me anymore without verifying it. So that may not be accurate, I've never had a need to verify it, but that's what a top, very expensive, very respected FA told me.

It makes no sense to me that income is treated this way when in divorce it's by default treated as household, but the tax guys don't give a flying F about what the family law folks are up to, so it doesn't matter.

Honestly, and I speak from experience here, the advice that you can get, even the advice you pay for, is practically useless until you really understand this stuff for yourself.

It's hard to even get good advice until you are literate enough with the material to be able to ask the right questions. The good news is, it really doesn't take very long to learn it, and there are endless sources of info available.

A single afternoon of googling and reading should get you to a level where you can very adeptly know how to ask exactly the right questions to be able to get meaningful answers when you seek professional advice.

I'm someone who did take the FA course and who did sell mutual funds in a bank.   While your TD advisor MAY be able to provide some advice to you, his/her job is to sell you a prodcut, specifically a TD product. This is one of the reasons I left the banking environment, some of the best client appointments I had were teaching people about budgeting and basic savings and RRSPs, however these sessions often did not result in an immediate sale, which meant I wasn't doing my job, which meant I wasn't pleasing my manager, which didn' t make my life easier, which meant I enjoued my banking job less and less. 

So your TD advisor may be able to help you, but their ulitmate goal is to sell you a product, so you may want to take his/her advise with a grain of salt.  Sorry for the rant!

The Fake Cheap

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Re: RRSP spousal account planning.
« Reply #25 on: August 09, 2020, 07:21:43 AM »
I always like to sum up spousal RRSPs as:

The person who makes the contribution gets the tax deduction.
The receiver of the contributions owns the money (generally speaking)
The contribution will be taxed in the hands of the receiver when withdrawn (generally speaking).

I find spousal RRSPs a bit on the complex side, and with income splitting and TFSAs kind of filling that space, they aren't a good option for a lot of people. 
Like previously pointed out, unless there is a vast income difference and a vast post retirement marginal tax difference, there really isn't much of a market for them. Having said all that, I realize what forurn I am on, so if you are really trying to max out and savings and CCTB, then the spousal could be a good way to do that. 

And way to go by the way maxing TFSAs on one average income!  You are already doing great!

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Re: RRSP spousal account planning.
« Reply #26 on: August 09, 2020, 08:00:10 AM »
Hi Islander,

I know exactly what you are getting at - to figure it out, I think we need a bit more information:

First, you need to find out what your husbands RRSP deduction limit is (you can find this on his most recent CRA Notice of Assessment (the letter you get after you file your taxes) or by logging into his CRA My Account.)

Second, how many kids do you have, and what are their ages? This will help figure out how much "parent tax" you may be paying and how advantageous your RRSP contributions will be at this point.

If anyone is wondering, this article does a decent job of explaining what she is trying to maximize: https://www.planeasy.ca/canada-child-benefit-hidden-tax-rate/

Here are the combined tax rates for BC for 2020, you can add the CTB tax rate to them to get your effective rate with the CTB included.




Depending on how low your annual expenses are, I guess there is the possibility that you could reduce your husbands (and thus family) taxable income enough to get the max CTB, which you could then use to max your annual TFSA contribution. Now that would be truly impressive and I would bow down to you!

Islander

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Re: RRSP spousal account planning.
« Reply #27 on: August 09, 2020, 05:28:07 PM »
Hi Islander,

I know exactly what you are getting at - to figure it out, I think we need a bit more information:

First, you need to find out what your husbands RRSP deduction limit is (you can find this on his most recent CRA Notice of Assessment (the letter you get after you file your taxes) or by logging into his CRA My Account.)

Second, how many kids do you have, and what are their ages? This will help figure out how much "parent tax" you may be paying and how advantageous your RRSP contributions will be at this point.

If anyone is wondering, this article does a decent job of explaining what she is trying to maximize: https://www.planeasy.ca/canada-child-benefit-hidden-tax-rate/

Here are the combined tax rates for BC for 2020, you can add the CTB tax rate to them to get your effective rate with the CTB included.




Depending on how low your annual expenses are, I guess there is the possibility that you could reduce your husbands (and thus family) taxable income enough to get the max CTB, which you could then use to max your annual TFSA contribution. Now that would be truly impressive and I would bow down to you!

Tothemoon, Iam so glad you can understand what Iam trying to achieve.

I really appreciate the support and encouragement. I am aware of the real motives of FA at the big banks, hence Iam wondering about Fee only advisors in my local area but as someone mentioned that maybe an accountant might be more helpful in my case. Can anyone refer an accountant in Vancover or how does one usually find a good accountant?

I guess like that song by biggie "mo money, mo problems." Good problems to have though I suppose and at least I have some time to have this figured out before next tax season.

I must mention we have proceeds in cash from selling our home last year. We moved from a lower cost living area to high cost area in order for my partner to make more money. So now we have a bigger income but housing is more  expensive where as before our housing situation was afforable but we were just getting by on husband's income.

We're hoping to enter the housing market but renting and being on the sidelines isn't as bad. We enjoy having less bills and less maitenence but crave more space. We are currently renting  2 bedroom basement, family of 4.  This is a whole other topic on rent vs buying but being a millennial I guess it's common to be torn between owning a home or working towards retirement and investing.

Anyway so, husband's deduction limit it 25k as well as mine.

2 kids, age 3 and 6.

Neither myself or husband have or will be receiving a pension.

« Last Edit: August 09, 2020, 07:52:35 PM by Islander »

Islander

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Re: RRSP spousal account planning.
« Reply #28 on: August 09, 2020, 05:54:33 PM »
Tothemoon, once again I wanted to show appreciation for your post. The link you posted is exactly what Iam trying to get at. This one as well might help other members understand my goal.

https://www.planeasy.ca/family-financial-planning-tax-strategies-for-families/

Islander

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Re: RRSP spousal account planning.
« Reply #29 on: August 09, 2020, 07:27:19 PM »
Another question I have is even though my income is "0" because I don't work I do receive income from my high intrest savings account. Is it possible for me to lower my income tax by claiming my 18% on HISA interests?

Iam assuming this would be of no benefit though if Iam correct? Because I would be in low income tax bracket anyway.
« Last Edit: August 09, 2020, 07:44:24 PM by Islander »

Goldielocks

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Re: RRSP spousal account planning.
« Reply #30 on: August 26, 2020, 12:11:05 AM »
Hi Islander,

I know exactly what you are getting at - to figure it out, I think we need a bit more information:

First, you need to find out what your husbands RRSP deduction limit is (you can find this on his most recent CRA Notice of Assessment (the letter you get after you file your taxes) or by logging into his CRA My Account.)

Second, how many kids do you have, and what are their ages? This will help figure out how much "parent tax" you may be paying and how advantageous your RRSP contributions will be at this point.

If anyone is wondering, this article does a decent job of explaining what she is trying to maximize: https://www.planeasy.ca/canada-child-benefit-hidden-tax-rate/

Here are the combined tax rates for BC for 2020, you can add the CTB tax rate to them to get your effective rate with the CTB included.




Depending on how low your annual expenses are, I guess there is the possibility that you could reduce your husbands (and thus family) taxable income enough to get the max CTB, which you could then use to max your annual TFSA contribution. Now that would be truly impressive and I would bow down to you!

Tothemoon, Iam so glad you can understand what Iam trying to achieve.

I really appreciate the support and encouragement. I am aware of the real motives of FA at the big banks, hence Iam wondering about Fee only advisors in my local area but as someone mentioned that maybe an accountant might be more helpful in my case. Can anyone refer an accountant in Vancover or how does one usually find a good accountant?

I guess like that song by biggie "mo money, mo problems." Good problems to have though I suppose and at least I have some time to have this figured out before next tax season.

I must mention we have proceeds in cash from selling our home last year. We moved from a lower cost living area to high cost area in order for my partner to make more money. So now we have a bigger income but housing is more  expensive where as before our housing situation was afforable but we were just getting by on husband's income.

We're hoping to enter the housing market but renting and being on the sidelines isn't as bad. We enjoy having less bills and less maitenence but crave more space. We are currently renting  2 bedroom basement, family of 4.  This is a whole other topic on rent vs buying but being a millennial I guess it's common to be torn between owning a home or working towards retirement and investing.

Anyway so, husband's deduction limit it 25k as well as mine.

2 kids, age 3 and 6.

Neither myself or husband have or will be receiving a pension.
Hi Islander,
I will PM you with my contact details.  I am a fee only (lump sum or hourly) financial planner (CFP) working in the Vancouver area.  Let me know if you are interested.

:-)

Goldielocks

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Re: RRSP spousal account planning.
« Reply #31 on: August 26, 2020, 12:29:37 AM »
Another question I have is even though my income is "0" because I don't work I do receive income from my high intrest savings account. Is it possible for me to lower my income tax by claiming my 18% on HISA interests?

Iam assuming this would be of no benefit though if Iam correct? Because I would be in low income tax bracket anyway.
Hi Islander,
It should work.
Your total income includes your high interest savings account income.
The RRSP deducts from line 15000 to create net income, line 23600.  (Can I say I dislike the new line numbering?)
Taxes are calculated using line 23600 as a start.   

Whether it makes sense to deduct past your personal exemption limit for the sake of CCTB would take a longer look.   $12,069 on 2019 return was the exemption.   For most tax questions, you would only reduce your income to $12,069, because zero tax after that, and you can save your remaining deductions for another year.

But -- how does CCTB calculate net family income?  Is the first $10k adjusted somehow?  Is the drop to the max bracket worth it?  Would doing so be fully offset by the dependent spouse tax benefit that your spouse would claim because you are less than $12k in income?  What would spreading the CCTB discount across more years look like, rather than maxing out a single year?  etc.

It depends on the number of kids, their ages, how much unclaimed RRSP deduction you have, etc.   13.5% "tax" rate for 2 kids is certainly more impressive than 7% "tax" for one kid.

---------------------
And of course, we now have the fact that under $30k and you get a whole lot more RESP grants and other things to consider..  Although some government programs do not let you deduct RRSPs from your income to get more benefits.