RRSP and no-income

[n2d2]

Hi,

I am trying to figure out a special tax situation. Last year I had no income, but contributed $5000 to the RRSP (out of my savings). This year will be having income. So the question is how to deal with this contribution?

1. I have previously withdrawn money for the house and owe over $10,000 for HBP. Minimum HBP repayment back is $1000.
2. I have enough RRSP room from previous years to cover the above $5000.

I am thinking about putting the entire $5000 towards HBP, so I don't touch my RRSP room and get tax credit next year by contributing some more to RRSP. This year, if I put $4000 towards RRSP (after subtracting HBP minimum), then I won't get any tax benefit. I am assuming I cannot carry forward tax benefit of $4000 to next year.

Thanks for your help.

[SpillOnAisle9]

I am assuming I cannot carry forward tax benefit of $4000 to next year.

....and you would be assuming wrong. Make the contribution this year, designate a portion for HBP payback and
defer the deduction to next year (or any years forward)

[SnoopDop]

Can he/she delay claiming the 2011 contributions to 2012 tax return ? is the CRA going to charge overcontribution penalties anyway ?

[SpillOnAisle9]

The claim is made on the tax return when the CONTRIBUTION happens. The DEDUCTION happens when the person decides
it suits them best. This year the OP will not benefit from the deduction so he can defer it. But the contribution event happens
this year.

[n2d2]

Where in the tax software/form do I indicate that I would like deduction to take place next year (or get deferred)? I am using studiotax to figure this out.

I am assuming the above is not automatic. If it is automatic, where do I check how much RRSP amount has been deferred for future year deductions.

Thanks.

[SpillOnAisle9]

I've only done it with QuickTax (TurboTax)....You input 3 amounts as I recall

- The total contribution (really in 2 pieces Mar-Dec, Jan-Feb)
- The designated HBP portion
- The amount of the deduction

If you enter 5000, 1000, and zero for the above boxes the deferral will be implied. It will show
up on your next NOA and nothing will be deducted (from your zero income!) this year

I guess there's actually 4 amounts involved....the 4th is the carry-over amount that will be zero this
year but $4k next year when you file.

All of the boxes are there if you look at the paper RSP schedule in the tax forms. Get a free
paper form package from a post office to verify

[jcpmont]

Is there any advantage of putting money in an RRSP if you don't have income? Shouldn't one invest in a TFSA instead?

[bionicbadger]

Is there any advantage of putting money in an RRSP if you don't have income? Shouldn't one invest in a TFSA instead?

Probably only for spousal RRSP if the spouse has no income. Then after 3(?) years (of no further contributions/RRSP action) you can withdraw the RRSP from the no income spouse (and since the spouse has no income, it shouldn't be taxed) and the contributor still gets the tax deduction for the year of the contribution.