RRSP Questions

[little-fish]

To get the most out of your refund, you can make your RRSP contirbution this year and claim your RRSP contribution in a later year if you consider that your income will be in a higher tax bracket than ur current tax bracket.

What is the best way to do if you have more $ to invest than your current unused contribution. Let's use the following as an example:
Unused contribution room = $20000
Free cash of $30000 sitting around

1) max out $20000 and invest the rest in an non-RRSP account?
or
2) Invest all $30000 than in an RRSP account, but only claim $20000, and claim the rest ($1000) in the following year?

or are there any other suggestions? thanks

[asdfvcx]

To get the most out of your refund, you can make your RRSP contirbution this year and claim your RRSP contribution in a later year if you consider that your income will be in a higher tax bracket than ur current tax bracket.

Just so you are aware, you still have to indicate on your taxes any contributions you have made during the year. You just don't have to take the tax deduction the year you made it.

2) Invest all $30000 than in an RRSP account, but only claim $20000, and claim the rest ($1000) in the following year?

You don't want to do this. There's a 1%/month penalty if you over-contribute. So if you over-contribute $10000, that's $100/month you will be losing. It doesn't matter when you are planning to take the tax deduction.

[Thalo]

If your contribution room is $20K and you know you'll accumulate $10K of new contribution room from the 2007 tax year (to be claimed on your 2008 taxes), I'd go ahead with the 2nd option. The extra $10K will then sit in your RRSP growing tax deferred as opposed to in a non-registered account.

[notanexpert]

If your contribution room is $20K and you know you'll accumulate $10K of new contribution room from the 2007 tax year (to be claimed on your 2008 taxes), I'd go ahead with the 2nd option. The extra $10K will then sit in your RRSP growing tax deferred as opposed to in a non-registered account.

Except that the second option will cost a $100 a month in overcontribution penalties, that's not good at all.

[Thalo]

Except that the second option will cost a $100 a month in overcontribution penalties, that's not good at all.

Nope, cause he's making it as a 2008 contribution. Contribute $30K now (before Feb 29th), claim $20K on your 2007 tax return, carry $10K forward to 2008. Of course, if he made less than $55K employment income in 2007, then he might be into his $2000 lifetime overcontribution allowance.

[TopTaxGuy]

You can over contribute up to $2000 over your lifetime.

With the excess, invest it in stocks. The capital gain will accrue without triggering a tax event until you liquidate your position. You may get dividends that are tax advantaged.