Personal Finance

RSP to TFSA

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  • Sep 3rd, 2014 8:07 pm
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Sr. Member
Mar 4, 2009
773 posts
29 upvotes

RSP to TFSA

Hello all

I currently have a lump of money in RSP. I was wondering if I withdraw these money and put in TFSA would there be taxes charged?

Thanks
13 replies
Deal Addict
User avatar
Jan 1, 2009
4265 posts
23520 upvotes
North York
Anytime your withdraw from your RRSP there are going to be taxes to pay
Sr. Member
Oct 14, 2012
952 posts
726 upvotes
Woodstock
Yes (for most people). When you withdraw money from your RRSP, it becomes part of your income for the year. In April next year, when you file your tax return, you will have to include it in your income. If you make enough money to pay taxes, you will be taxed on it.

Depending on how much you withdraw from your RRSP, you may also pay an immediate "withholding tax." You will report that withheld tax on your April tax return. You may still owe MORE taxes or less tax depending on your other income.

In general, it rarely is a good idea to withdraw from an RRSP to make a contribution to a TFSA. There are certain special cases when it's worth it (e.g. if you are close to 71 and have no taxable income) but for most people it's not a good idea.

Once you take money out of your RRSP you also lose that contribution room forever. It's different than with a TFSA where you get back the contribution room the next year.

I hope this helps a bit.
Sr. Member
Mar 4, 2009
773 posts
29 upvotes
Thanks for the quick responses!

I have a couple other questions.

1. What if I have a GIC, how would I report that in the income tax? Is there specific tax forms for these savings made?

2. Could I transfer money from a current TFSA to a chequing acount, then transfer that money from chequing to another TFSA and the contribution for that year will be the same?
Sr. Member
Oct 14, 2012
952 posts
726 upvotes
Woodstock
I'm not sure what you mean. Correction for error caused by joining two unrelated clauses with until: If you have a GIC inside a RRSP you don't report the income or pay tax on it until you make a withdrawal from your RRSP. If you have a GIC inside a TFSA you don't report the income or pay tax on it ever.

If you just have a regular GIC that is not part of a RRSP or a TFSA, you usually will get a tax receipt in March telling you how much income to report on your income tax in April. It is reported as "interest income."
Sr. Member
Mar 4, 2009
773 posts
29 upvotes
Thanks make sense

See im planning to move ing tfsa ($6000) to ing chequing (6000) then that to peoples trust tsfa (6000)...what will be my contribution for this year?
Deal Addict
User avatar
Jan 1, 2009
4265 posts
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North York
You don't need to move it to chequing account if you are moving it into a different TFSA! just request Tangerine (ING) to transfer to your other TFSA account.

You have to look up your 2013 notice of assessments in order to see what your max contribution is.
Sr. Member
Mar 4, 2009
773 posts
29 upvotes
Yes saw my max contribution. But What im saying is will i still have contributed 6000 only? And not 12000
Deal Addict
User avatar
Jan 1, 2009
4265 posts
23520 upvotes
North York
You would be overcontributing if you move from TFSA to chequing account - so it should always be a transfer thru ING to the other TFSA account
Sr. Member
Oct 14, 2012
952 posts
726 upvotes
Woodstock
You must not move it from your TFSA to your chequing account to another TFSA. That will count as over contributing.

Contact People's Trust for a T2033 form to request a transfer from your Tangerine TFSA directly to your new People's Trust TFSA. NOTE: If your TFSA at Tangerine is in a GIC, you may lose some/all of the interest you've earned if you transfer it before it reaches its maturity date. Do the math and see if it makes you more money to wait till the GIC matures or to start earning the 3% a year sooner.
Sr. Member
Mar 4, 2009
773 posts
29 upvotes
so if I did make the transfer, I have contributed 12 k instead of 6k?
Deal Fanatic
User avatar
Feb 19, 2010
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imp wrote: so if I did make the transfer, I have contributed 12 k instead of 6k?
This has been a painful thread to read... :facepalm:

If you "transfer" it's NOT a contribution. If you "withdraw" it, put it in your chequing account, and then deposit it at another institution, as you're talking about, that IS a contribution.
Deal Fanatic
Nov 24, 2013
6478 posts
3339 upvotes
Kingston, ON
imp wrote: so if I did make the transfer, I have contributed 12 k instead of 6k?
No, if you transfer, you've contributed $6k and just moved it around. If you withdraw (to chequing) and recontribute, you've contributed $12k and withdrawn $6k (which doesn't get added back to room until next year).
Sr. Member
Mar 4, 2009
773 posts
29 upvotes
Thanks a lot.

Ive reversed the transaction and planning to transfer one tfsa to another tfsa without going through chequing

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