RRSP/401K contribution carry over

[wimzieguy]

Hi,

I have a tax question I am hoping some one can answer.

My situation:
- I am a commuter currently living in Ontario, Canada and working in US. I daily commute to work in US.
- I do contribute to both my RRSP's and 401K accounts to bring down my tax liability.
- For 2010, my annual pay was about 100K. I paid about 16K in taxes to US. My RRSP + 401K contribution was 24K. (RRSP contribution limit is 60K)

The question I have is I don't want to use all of my RRSP/401K contributed amount. I want to use only that much which can bring my taxes almost to zero. Is this possible?

While using turbo tax software, I noticed that if I state my RRSP/401K contribution to about $8000, my tax liability is about $750. If it is correct, it appears that I can use the remaining 16K ($24K - $8K) towards my RRSP contribution for 2011.

Am I right in making this assumption? If not, how can I "save" my hard earned RRSP/401K contributions for later years?

Please advise.

Thanks.
Wimzie

[nelsona]

You cannot save your 401(k) contributions. Theuy must be used in the year they were made on your US return, and on your Cdn return.

Deductibility of your RRSP contributions is ALWAYS optional. They can be carried forward on schedule 7. You do have to report them on schedule 7, and include them on the new 401(k) forms. They can be deducted in any future year, but will count towards your contrbution room in 2010, as will your 401(k) and any pension plan.

Don't forget to include your 401(k) contributions in your wages on your Cdn return.

Your RRSP contribs are NOT deductible on your US return.

2 points to consider:

1. you shouldn't necessarily use your RRSP contribs to bring your tax liabilty to zero, you might want to consider not using them past the point of the lowest tax bracket (ie 20% in Ontario on first 37K). This will allow you to get a better deduction when you are earning all your income in canada. In other words, you should be trying to get MORE than a 20% deduction on your RRSP dollar.

2. If none of your RRSP is required to reduce your Cdn tax to zero, you may wish to take a look at how you are filing in US. You are allowed to file a 1040, and if married, a special 1040NR that would reduce your US tax liability.

[nelsona]

And remember that since you are contributing to a 401(K) in your name, you should probably be putting any RRSP money into a spousal fund, to balance out future income for Cdn purposes.