Posted by Tim Stobbs on March 19, 2014
I finished a draft run on my taxes from last year for both my wife and I and realized I have a small problem. I did much better on contributing to our RRSPs than I thought I did.
On the plus side I should be getting back over $4000 in a refund. On the down side I believe I have burned through all my backlog of RRSP contribution room and then some. At first I thought I was fine and then I realized if I claimed all the contribution in the first 60 days of this year on my 2013 taxes I would end up over contributing by just under $200 than my limit.
Now I have two potential solutions to this RRSP over contribution issue:
- Don’t claim $200 of RRSP contribution in 2013 and carry it for use in 2014 or
- Do nothing and realize I can over contribute by $2000 in an RRSP for a given year.
I had forgotten option #2 existed until I was reviewing some tax websites, so I tempted to just do nothing and take the refund. After all it will balance out next year anyway.
In the longer term I now have to look at potentially doing something, but I’m not 100% sure I can. I’m out of back contribution room in my RRSP, but my wife has about $20,000. Yet she earns so little she doesn’t pay any income tax. So I’m looking into if she contributes lets say $10,000 to her RRSP that would drive her income to zero and then does that trigger the transfer of her basic income deduction to me? Thus giving us a tax savings at my marginal rate. That is all in theory, I need to confirm we could do it.
Yet that plan would have a downside of introducing a zero income year on my wife’s CPP calculation. Which would be fine if that occurs during a year when she could claim a child rearing provision to her CPP calculation, but otherwise may lower her CPP benefits in the long run. Ah choices in life.
So have you run into any odd situations with your income taxes this year? If so, please share what it was and how you dealt with it.