Personal Finance

Spousal Linked Return

  • Last Updated:
  • Apr 18th, 2018 3:53 pm
Tags:
None
[OP]
Sr. Member
Mar 14, 2015
628 posts
18 upvotes
Edmonton

Spousal Linked Return

What is this? What's the purpose of doing a linked return as opposed to two of us separately filing under married? Is there any benefits?
13 replies
Sr. Member
Jan 16, 2010
557 posts
103 upvotes
Technically all returns are filed individually - I'm assuming you mean doing 2 returns on the same site / in the same software package?

Usually the advantage in that case is the software helps you try to maximize your return, as there are certain things that can be shared between your spouse (like donation and transit credits) that filing software can automatically allocate to the higher earning spouse. In reality though, it still ends up being 2 separate netfiles that are processed.
[OP]
Sr. Member
Mar 14, 2015
628 posts
18 upvotes
Edmonton
Yeah I'm using StudioTax.

Another question, I added the Home Buyers Plan minimum payment and then when I look at my T1 the amount (eg. 1000) is added to my income for the year beside the row that says "RRSP Income (T4RSP). I never got a T4RSP mailed to me, the only thing I added was my HBP payment amount. Confused...
Sr. Member
Jan 16, 2010
557 posts
103 upvotes
I don't use StudioTax, but did you actually pay money into your RRSP during the year? You have to contribute to your RRSP (and get an RRSP slip) to be able to designate it as a HBP repayment. If you don't do that, then the HBP minimum amount will be included in your income. It sounds like the latter is the case. You won't get a T4RSP for taking a HBP repayment hit to your income, as it is just done on your return.
[OP]
Sr. Member
Mar 14, 2015
628 posts
18 upvotes
Edmonton
I contributed 5K this year but my spouse did not.

How come the HBP is included in the income IF I didn't contribute RRSP? Sorry newb q's...
Sr. Member
Jan 16, 2010
557 posts
103 upvotes
The way the HBP program works, you have to pay back the amount you withdrew over a maximum of 15 years after 2nd year of the withdrawal. If you don't designate at least 1/15th of an actual RRSP contribution as a HBP repayment, then the CRA treats that 1/15th minimum amount as if you just withdrew it from your RRSP and treats it as a taxable amount (i.e. added to your gross income). RRSPs are a tax deferral - you eventually pay tax on it. As a retirement vehicle, it is intended to be withdrawn in later years. The HBP is a bit special since always you to access the cash flow early and avoid the tax hit for the withdrawal as long as you pay it back.
[OP]
Sr. Member
Mar 14, 2015
628 posts
18 upvotes
Edmonton
So if I don't contribute to any RRSP's in 2014 then when I repay the HBP, that amount is added to my income tax.

If I contributed to my RRSP, say 5000, then the minimum amount that I pay for the HBP will get deducted from that 5000 (say 500, so 4500) then I would have $4500 left to use if I wanted to against my income? (70K salary, lower by 4.5K potentially)?
Sr. Member
Jan 16, 2010
557 posts
103 upvotes
FlyOverMyDoodle wrote:
Mar 20th, 2015 12:15 am
So if I don't contribute to any RRSP's in 2014 then when I repay the HBP, that amount is added to my income tax.
Essentially, yes.
If I contributed to my RRSP, say 5000, then the minimum amount that I pay for the HBP will get deducted from that 5000 (say 500, so 4500) then I would have $4500 left to use if I wanted to against my income? (70K salary, lower by 4.5K potentially)?
You choose to designate as much or as little of your RRSP contributions as a HBP repayment. It could be as little as $0 or as much as the balance of the HBP, it's up to you. You could decide to pay the entire $5000 back to your HBP in one year, which would result in your taxable income not being affected by the RRSP contributions in that year. I don't use Studiotax, but I imagine there's an area to decide the value you want to designate as a HBP repayment.
Member
Apr 22, 2010
321 posts
9 upvotes
I have a question regarding HBP:

Is there any cons of paying back HBP if one doesn't contribute to RRSP that year? If I just keep repaying it so that it just adds onto my income, the only con would be it increases my income and is taxable right? If I take the minimum from a RRSP then it doesn't get added to my income and that's the pro?
Sr. Member
Jan 16, 2010
557 posts
103 upvotes
Infinitii wrote:
Mar 20th, 2015 1:35 am
I have a question regarding HBP:

Is there any cons of paying back HBP if one doesn't contribute to RRSP that year? If I just keep repaying it so that it just adds onto my income, the only con would be it increases my income and is taxable right? If I take the minimum from a RRSP then it doesn't get added to my income and that's the pro?
Mostly. From a tax return perspective it really ends up being the same thing fundamentally as you either forgo the tax deduction while contributing X dollars to your RRSP, or take a tax hit having the minimum amount added to your taxable income that year (you would end up paying the marginal tax rate on that amount). The primary con to consider in not paying back the RRSP means you forgo the potential of compounding returns tax free for that amount in your RRSP. Essentially the HBP withdrawal amount that was included in your income is lost RRSP room forever, so you forgo the ability to grow that amount tax free and withdraw it at a later date (which is ultimately why RRSPs exist).

In most cases, it makes sense to repay the HBP through RRSP contributions, at the minimum rate over 15 years. To add some fun to the mix, if you suddenly have a very low income and have a low cash flow, it might actually be advantageous to take the HBP repayment as an addition to your income, because your marginal tax rate could be very low (especially the case if it's lower than when you took the RRSP deduction in the first place). The latter won't be very common for most folks.
Sr. Member
Oct 31, 2002
619 posts
27 upvotes
Toronto
rasadam wrote:
Mar 20th, 2015 1:11 am
(Note: paying more than the minimum amount of the HBP in one year doesn't change the value of minimum amount in following years, as it is always based on 1/15th of the original HBP withdrawal amount until it is fully paid back).
Repaying more than the minimum does reduce the minimum for the following years. The minimum is calculated as the remaining balance divided by the number of remaining years. The minimum for the first year is 1/15th of the balance, the second year 1/14th, the third year 1/13th, etc.
http://www.cra-arc.gc.ca/tx/ndvdls/tpcs ... ml#example
Sr. Member
Jan 16, 2010
557 posts
103 upvotes
gimmegimme wrote:
Mar 20th, 2015 10:28 am
Repaying more than the minimum does reduce the minimum for the following years. The minimum is calculated as the remaining balance divided by the number of remaining years. The minimum for the first year is 1/15th of the balance, the second year 1/14th, the third year 1/13th, etc.
http://www.cra-arc.gc.ca/tx/ndvdls/tpcs ... ml#example
Thanks for that correction - I don't know why I thought that.
Deal Fanatic
User avatar
Jul 4, 2005
5327 posts
425 upvotes
Ottawa
Anyone know why the spousal link return button is greyed out? I have another set of married couples that have it linked, but it's not working for me.

Top