gryphea

OK, so we have now been here since Nov 2007 and so both earned in the last tax year.

I can now join my company RRSP. They pay a bit, I pay a bit. How does this (my contributions) go down on my tax return for 2008? Or does it not go down at all until 2009 tax return?

My OH cannot join his for some reason until he is PR, but they have been paying him their contribution in his pay packet since he joined. We want to invest some of this in an RRSP by the cut off date at end of Feb (or whenever it is). Does this go down therefore on his 2008 tax return?

Gryphea

Novocastrian

It'll all show up on your T-4 which your employer will send to you sometime between now and about March for your 2009 return, But I don't think you are actually talking about an RRSP, that sounds more like a company pension plan to me.

Auld Yin

Your contribution allowance is 18% of earned gross income, including your employer's contribution.

From the Royal Bank website:-
Annual Contributions

You may contribute to your RRSP until December 31 of the year in which you reach age 71. The following limits and deadlines apply annually.

Maximum annual RRSP contribution limits
Year Contribution limit
2007 $19,000
2008 $20,000
2009 $21,000
2010 $22,000

Your allowable RRSP contribution for the current year (2008) is the lower of:

* 18% of your earned income from the previous year (2007), or
* The maximum annual contribution limit for the taxation year, or
* The remaining limit after any company sponsored pension plan contributions.

Earned income includes salary or wages, alimony received, and rental income, among other income sources, but does not include items such as investment income.

You'll find the exact amount you can contribute to your RRSP for the current year on the Notice of Assessment you receive from Canada Revenue Agency after they process your previous year's tax return.

Hope this helps.

montreal mike

there is some info on rrsp's on the link I put on another thread earlier tonight


http://www.taxtips.ca/RRSPs.htm

JonboyE

Your contribution limit for 2008 will be very low, as it is based on your 2007 earnings. Even so, it is worth making the maximum contribution you are allowed as you will get some tax back when you file for 2008. You have up to the end of February 2009 to make contributions in 2008.

Any contributions you make in January and February 2009 can be applied to either your 2008 or 2009 tax year. So, if you have used up your 2008 contribution limit you can continue to make contributions and apply these to your 2009 limit. As Brian has explained, you can quickly calculate what your approximate maximum limit will be for 2009. And, as Novo has said, if your employer is sponsoring the RRSP scheme all the information you need for tax filing should be shown on your T4.

triumphguy

The only benefit of RSP's is the tax write off up front. There are other ways to get tax deferred growth, and to avoid the 100% tax on the principal and growth of your investment when you take it as income.

gryphea

Thanks guys, I am still confused.

Me- my schme is actually called an RSP. I didn't earn here in 2007. So am I right in thinking I now join the scheme but all contributions actually go into my 2009 tax return?

My OH. How much can he now put into an RRSP? Is it the ceiling based on the amount he earned in 2007 (not as bad as you think as he got a taxable lump sum relocation) OR is it based on what he earnt in 2008. So if its the former, I assume it goes on 2008 tax return, but if its the latter what happens?

Gryph

Novocastrian

His RRSP contribution ceiling for 2008 (filed in spring 2009) is based on his 2007 taxable income. His 2009 limit (to be filed in early 2010) will be based on his 2008 earnings. Just get Quicktax or similar.

Almost Canadian

So does this mean that all immigrants are precluded from placing any amounts into a RRSP in the first year in which they live in Canada (as they didn't file a tax return for the previous year) or is their income based on what they earned in their country of origin for that year?

Let's say someone arrives in Canada in February of this year. How much could they pay into their RRSP in 2009 and how is the maximum contributions for 2009 calculated?

Auld Yin

(not as bad as you think as he got a taxable lump sum relocation)

If from the UK and paid in the UK I don't believe it's eligible for RRSP contribution in Canada.

Auld Yin

Let's say someone arrives in Canada in February of this year. How much could they pay into their RRSP in 2009 and how is the maximum contributions for 2009 calculated?

RRSP contribution levels have a one year delay built in. Your contributions/claimable amount would be based on your 2009 income and as such would be claimed on your 2010 ITR filed after December 31st.2010 .e.g.

Should one earn $100k from Feb.1-Dec.31 2009 and file a tax return, say April 2010, the government will send you a Notice of Assessment in which will be stated your RRSP allowance for 2010 which you would claim/deduct from your 2010 ITR in early 2011.

Souvenir

I don't think it would qualify as earned income. My RRSP allowance dimisses my unearned income.

JonboyE

Yes.

His 2008 limit is shown on his tax assessment for 2007 and he can contribute up to this maximum shown until the end of February 2009. Any contributions towards his 2008 limit are claimed on his 2008 tax return (the one he will file before the end of April this year).

If he has maxed out his 2008 limit he can contribute now towards his 2009 RRSP. Although he won't know exactly what his 2009 limit is until his 2008 return is assessed, he can make a reasonable guess as has been explained above. Any contributions he makes now towards his 2009 limit will be claimed when he files his 2009 tax return - in April 2010.

JonboyE

Effectively, yes.

No, it is only based on earned income that is taxed in Canada.

They do not have any contribution room in 2009. You are allowed to go up to $2,000 over your cumulative limit at any time without penalty (although you don't get a refund on this). I guess the new immigrant could make a $2,000 contribution, but they couldn't claim it on their 2009 tax return.

JonboyE

RRSPs offer tax deferral as you get a tax refund when you contribute and pay tax when you withdraw. The tax-free compounding within the fund will make a considerable difference to the amount saved if you have some years between contributing and withdrawing. You get a tax saving if your marginal tax rate when you withdraw is less then when you contribute. This is what makes the RSSP the best vehicle to save for retirement – you contribute during you high earning years and withdraw after retirement when your earnings are much lower.

If you are saving for something you want to buy before you retire then a Tax Free Savings Account makes more sense. You still get the tax-free compounding but as there are no tax breaks when you contribute there is no tax to pay when you withdraw cash. A TFSA would make sense if you wanted to save for 10 years to buy a holiday home as you will need the cash in your prime earning years.