Personal Finance

RSP contribution room question

  • Last Updated:
  • Feb 14th, 2018 1:35 pm
[OP]
Jr. Member
Aug 16, 2013
126 posts
27 upvotes
MARKHAM

RSP contribution room question

Appreciate the help guys:

Lookin to make RSP contributions for purposes of deducting my 2017 income. Is the maximum I can contribute just based on my 2016 NOA? Or can I contribute 18% of my 2017 T4 income as well even though I haven't reported income for 2017 yet?

(assuming no group savings from employer)

Thanks!
13 replies
Sr. Member
Feb 26, 2017
771 posts
360 upvotes
Veritate wrote:
Feb 11th, 2018 9:22 am
Appreciate the help guys:

Lookin to make RSP contributions for purposes of deducting my 2017 income. Is the maximum I can contribute just based on my 2016 NOA? Or can I contribute 18% of my 2017 T4 income as well even though I haven't reported income for 2017 yet?

(assuming no group savings from employer)

Thanks!
Your 2017 income will set your RRSP room for 2018 (you will get the exact figure with this years NOA). You can check CRAs site to get the exact amount you can contribute for the 2017 tax year.
Sr. Member
Oct 14, 2012
597 posts
302 upvotes
Woodstock
If you contribute more than the amount on your 2016 NOA before Mar 1 you will report it on your 2017 return but you cannot deduct it. It will carry along undeducted until at least your 2018 return next year or whatever future year your decide to deduct it.

Is that what you were asking? E.g. were you asking if you can deduct more than on your 2016 NOA?
Sr. Member
Jun 10, 2008
997 posts
101 upvotes
BetCrooks wrote:
Feb 11th, 2018 10:51 am
If you contribute more than the amount on your 2016 NOA before Mar 1 you will report it on your 2017 return but you cannot deduct it. It will carry along undeducted until at least your 2018 return next year or whatever future year your decide to deduct it.

Is that what you were asking? E.g. were you asking if you can deduct more than on your 2016 NOA?
Thanks - I had this question as well.... I entered my RRSP deduction room in SimpleTax based on the 2016 NOA and then started playing around with the optimum RRSP contribution feature - it seemed to consider amounts even if it exceeded the deduction limit and then take that into consideration when calculating my 2018 room.....

I'll be sticking to deducting just to my 2017 room and carrying forward the rest for the 2018 tax year like you have mentioned.
Newbie
Feb 10, 2018
10 posts
Can we contribute to RRSP based on 2017 income and take the money out as part of Home Buyers plan after 3 months?

Would I get tax benefit while filling taxes for 2018?
Newbie
Feb 9, 2018
65 posts
41 upvotes
Redeagles wrote:
Feb 11th, 2018 12:46 pm
Can we contribute to RRSP based on 2017 income and take the money out as part of Home Buyers plan after 3 months?

Would I get tax benefit while filling taxes for 2018?
Yes, You can make RRSP contribution in 2018 based on the RRSP contribution room from 2017 income or any carried forward contribution room from previous years. Wait 3 months and then withdraw it in 2018 under Home Buyers Plan. You need to fill out Form T1036, Home Buyers' Plan (HBP) Request to Withdraw Funds from an RRSP to qualify it as eligible withdrawal under HBP. You can also deduct these contributions in your 2018 tax return because technically what you withdraw under HBP is a loan to you as opposed to a regular withdrawal. You either pay it back in future years or report the withdrawals as income.

You need to be aware of another rule as well. Before applying to withdraw funds under the HBP you must have a written agreement to buy or build a home, with the condition that your final withdrawal under the HBP can be no later than 30 days after the closing date. Any withdrawals after the 30-day period would be included in your income and subject to tax.
Newbie
May 12, 2017
30 posts
6 upvotes
You can make an RRSP contribution based on 18% of 2017 employment income before you file your 2017 taxes. However, if you usually max out your RRSP room, it is recommended that you wait until after March 1 2018 to contribute for room generated from 2017 income. The reason is that contributions between Jan 1 2018 and March 1 2018 might be lumped into the previous year RRSP contribution room on your tax software if you don't select just the right options. It is a pain to resolve with the CRA if you don't report it just the right way. Better to just contribute after March 1 2018 if you know what your room will be and avoid any possible error or confusion.
Sr. Member
Oct 14, 2012
597 posts
302 upvotes
Woodstock
It's important to read through your income tax return before you submit it. Read through Schedule 7 and make sure it reports your RRSP contributions and deductions properly. It's quite straight forward if you take a few minutes with it.
https://www.canada.ca/content/dam/cra-a ... s7-17e.pdf
If your tax software is not using a Schedule 7 to report the Jan/Feb 2018 contributions made and reported but not claimed as a 2017 deduction, then yes, don't file it until you fix the problem.
Deal Fanatic
User avatar
Jun 26, 2005
8724 posts
967 upvotes
Toronto
In my personal opinion, most everyone's investment inside their RRSP will be inferior in returns when compared to investing in a property. Be it your own residence or an additional(s) for renting out.

The rebate you get may look good, but now you've locked in your money to only what an RRSP can invest in. Funds, stocks, bonds, etc.

If you withdraw for HBP, you still need to repay it back, so there's another debt you have to pay back on top of your new mortgage. Do we all really need that?

I'd rather not contribute to any RRSP, and save up for a downpayment.

Other reasons include:

- leverage: when you buy a property, you only pay 20% for downpayment and the rest is mortgage.
- a mutual fund will not loan you 80% (you could borrow, but then you'd be paying interest and worrying if your fund value will drop)
- the mortgage is helped out by rental income (you dont get rental income for mutual funds or stocks)
- 25yrs later, you will now own a property, and I bet it will be worth $1 million or more (remeber, this will be in the year 2043); i doubt your mutual funds will be worth $1 million+
- you can actually LIVE in your property if you wanted to (can't do that in a fund)

If I hadn't contributed so much into my RRSP, I'd be able to pay for 1 or 2 downpayments many years ago and be a landlord of many units now.

Bottom line: (IMO), don't contribute into your RRSP, which locks you into low returns. Keep it outside (put in TFSA), and save up $100,000 to buy a condo unit to rent out instead
Newbie
Mar 4, 2015
51 posts
28 upvotes
Montreal
I don't know if I'd call the entire universe of stocks "low returns", but some employers match RRSP contributions so that's a 100% return right off the bat, I'd contribute at least to the employer's cap
Deal Addict
Mar 8, 2013
1829 posts
593 upvotes
andre83 wrote:
Feb 12th, 2018 11:15 pm
You can make an RRSP contribution based on 18% of 2017 employment income before you file your 2017 taxes. However, if you usually max out your RRSP room, it is recommended that you wait until after March 1 2018 to contribute for room generated from 2017 income. The reason is that contributions between Jan 1 2018 and March 1 2018 might be lumped into the previous year RRSP contribution room on your tax software if you don't select just the right options. It is a pain to resolve with the CRA if you don't report it just the right way. Better to just contribute after March 1 2018 if you know what your room will be and avoid any possible error or confusion.
Contribution amount is one thing, and deduction amount is something else. I think that you are better off contributing before March 1 and deciding later what you want to deduct in the current tax year. If you have unexpected income, such as mutual fund distributions, that arrive late, you may wish that you contributed earlier. If you make a mistake in what you (or your software) claims, it should be fixable. On the other hand, I don't see how you can convince CRA that the contribution you made after March 1 was a mistake that you meant to contribute before the deadline.
Newbie
Jul 28, 2017
16 posts
5 upvotes
So the actual contribution room before March 1, 2018 is the contribution room from the 2016 Notice of Assessment + 2017 Salary x 18%?
Newbie
May 12, 2017
30 posts
6 upvotes
akaManny wrote:
Feb 13th, 2018 4:50 pm
Contribution amount is one thing, and deduction amount is something else. I think that you are better off contributing before March 1 and deciding later what you want to deduct in the current tax year. If you have unexpected income, such as mutual fund distributions, that arrive late, you may wish that you contributed earlier. If you make a mistake in what you (or your software) claims, it should be fixable. On the other hand, I don't see how you can convince CRA that the contribution you made after March 1 was a mistake that you meant to contribute before the deadline.
You're correct, if you contribute between Jan 1 and Mar 1, you can in general choose which year to have the contribution considered and it gives more flexibility around when you can claim the deduction, but only if you haven't already maxed out your room.

My main point was for people who max out their RRSP year after year. Such people may be tempted to contribute the full 2018 room from 2017 income starting on Jan 1 2018, but they should consider that it's more likely to make an unintentional error in tax filing since the forms and notes are designed around the idea that contributions before March 1 2018 are typically for the 2017 year.
Member
Sep 20, 2006
221 posts
54 upvotes
Not really what OP was asking here and your advice has already been refuted in your other thread, but just to address your points one by one:
rfdrfd wrote:
Feb 13th, 2018 11:41 am
Other reasons include:

- leverage: when you buy a property, you only pay 20% for downpayment and the rest is mortgage. You can borrow to invest.
Use a LOC to borrow to invest in the stock market and there is no cap to your leverage.
- a mutual fund will not loan you 80% (you could borrow, but then you'd be paying interest and worrying if your fund value will drop).
See above. Plus, you're paying equally-deductible interest on the mortgage and still worrying the value of the property will drop - eg my properties in Ottawa 2001-2018 or 2009-2018.
- the mortgage is helped out by rental income (you dont get rental income for mutual funds or stocks)
Yes, you receive dividends that you could choose to use to help pay the investment loan
- 25yrs later, you will now own a property, and I bet it will be worth $1 million or more (remeber, this will be in the year 2043); i doubt your mutual funds will be worth $1 million+.
Unless you cherry-pick a particular housing market that you can only identify in retrospect, history will show on average better returns in the stock market than real estate.
- you can actually LIVE in your property if you wanted to (can't do that in a fund).
What you'd be doing is forfeiting rental income in order to live in the property. You could equally choose to use your dividends to pay rent for a property you live in, but in addition you can choose the perfect property for your neds at that time and not be limited to the one you own

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