Spousal RRSP advice

eortlund · Post by **eortlund** » Wed Feb 11, 2009 4:29 pm

Well, we have been approved for permanent residency and the whole process should be finished soon. I'll have my own SIN, and can open a spousal RRSP. Considering some of your past advice, and some things I read in the Border Guide, I'm wondering if there is a way to structure this so that future taxation is minimized should we return to the US and take our RRSPs with us.

*Is there a tax advantage if the spousal RRSP is open somewhere other than where my husband's employer-sponsored RRSP is located? I know you have talked about some RRSPs being deductible and some not. If the spousal RRSP is open at the same place where my husband's is, is it considered a personal RRSP anyway?

*I read about something called Section 217 where the CRA will refund the taxes of a person with no or low income, after the RRSPs are moved to the US. I don't know our future plans, but it's possible that if we move to the US, I would not work for the first year while we get resettled. Would this be reason to put the bulk of our retirement savings into my spousal RRSP rather than his?

Is there anything else I should consider as we set this up? Thank you.

nelsona · Post by **nelsona** » Sat Feb 14, 2009 4:36 pm

As I have mentioned before, any RRSP contributions not made thru a employer-plan will not be deductible in US and therefore will be remavable tax-free on withdrawl (just the contribs if yoru spouse is a US tax filer, both the contribs and pre-US growth if your spouse in not a US tax filer).

The deductibility of RRSPs is of little value to US taxpayers living in canada, so, private RRSPs are as good if not better than employer-plans (other than any matching).

The protocol really helps Cdns living in canada and working in US.

eortlund · Post by **eortlund** » Tue Feb 17, 2009 9:50 am

Thank you. Is a spousal RRSP considered private no matter what? For example, my husband's employer-sponsored plan is at RBC? If I open a spoual RRSP at RBC, I am thinking this is considered private? Thanks again.

nelsona · Post by **nelsona** » Tue Feb 17, 2009 1:59 pm

An employer paln is one that is funded through payroll deduction ONLY.

nelsona · Post by **nelsona** » Tue Feb 17, 2009 2:00 pm

So, only the employee's and only the one funded through his work.

eortlund · Post by **eortlund** » Wed Feb 25, 2009 10:11 am

Thank you again for the very helpful information.

As far as future taxation, do you think it makes sense to try to spread our investments equally between the RRSPs, or to put the bulk into mine due to the Section 217 rule possibly being applicable?

nelsona · Post by **nelsona** » Wed Feb 25, 2009 10:15 am

I am always a firm believer in putting as much RRSP in the hands of the lower earner (either currently, or, especially in future), whether or not 217 comes into play.

eortlund · Post by **eortlund** » Wed Feb 25, 2009 10:18 am

Thank you for your quick reply! Makes a ton of sense.

nelsona · Post by **nelsona** » Wed Feb 25, 2009 10:25 am

Remember, US citizens living in canad should not get over hung-up on the deductibility of RRSP contributions on their 1040. You don't need the deduction to avoid paying US tax, and any non-deductible contributions will form part of your 'investment' in the RRSP which wioll eventually come out tax-free in US. Deductible contributions (made thru employer plans) will end up being taxable, even if they gave you little US tax benefit originally.

eortlund · Post by **eortlund** » Wed Feb 25, 2009 10:41 am

Thanks. How likely is it that we would be taxed by both the US and Canada for those deductible contributions (through employer) someday? Would the foreign tax credits, etc. prevent double taxation?

nelsona · Post by **nelsona** » Wed Feb 25, 2009 10:58 am

tax credits never really get rid of double taxation, since foreign income is taxed at the marginal rate and foresign credited at the effective rate. This would be more clear to you if you currently had income from both sides of the border.

All I'm saying is that the RRSP deduction on the 1040 is not that a great feature that one should load up their employer plan at the expense of their spouse.

eortlund · Post by **eortlund** » Wed Feb 25, 2009 11:24 am

Thank you.

pcourtney · Post by **pcourtney** » Sun Mar 29, 2009 9:01 am

A US citizen living in Canada, who is also a Canadian citizen, has her own RRSP as well as a spousal RRSP created by her husband. The US tax treatment of her own RRSP is straightforward but what about the spousal RRSP - IRS staff I talked to were unable to advise on this.

nelsona · Post by **nelsona** » Sun Mar 29, 2009 1:35 pm

The spousal is treated exactly the same. Its considered to belong to the non-contributing spouse.