RRSP contribution to deduct interest income

catherine · Post by **catherine** » Wed Apr 12, 2006 1:14 pm

Canadian citizen work in US , deemed non residence in Canada
The only canadian source of income is the interest income ( the bank automatically hold 20% as tax ) , still have unused RRSP . Could I use RRSP to deduct the interest , so I won't need to pay the tax for it .

nelsona · Post by **nelsona** » Wed Apr 12, 2006 2:18 pm

First off the bank should be withholding 10% on interst not 20%. get this fixed.

Second, the 10% tax is your final Cdn obligation on interest. You cannot reduce or increase this tax with other income or deductions. It is a flat tax.

I would not suggest you add to your RRSOP at this time, since it will not get you a tax deduction, and will complicate your US tax wehn you wish to withdraw your RRSP.

Remember your 8891 requirements in US.

nelsona · Post by **nelsona** » Wed Apr 12, 2006 2:19 pm

Remember too, that you have to declare the gross interest (befroe taxes ) on your 1040 as well, and take credit for the Cdn tax on form 1116.

catherine · Post by **catherine** » Wed Apr 12, 2006 2:53 pm

Thanks Nelson .