RRSP contribution limit and over contributing

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Jonhello
Posts: 59
Joined: Sat Oct 05, 2013 1:28 am

RRSP contribution limit and over contributing

Post by Jonhello »

We just started doing our taxes for Canada and are a little confused.

According to the CRA, my wife's 2015 deduction limit is $3,901 and her contributions available to deduct for 2015 is $1,329. She contributed $1,329 in 2015 and then $3,000 in January 2016. Has she over-contributed for 2016? If so, what should we do?

Thank you!
K104XYZ
Posts: 18
Joined: Sun May 18, 2014 11:05 am
Location: Calgary AB

Post by K104XYZ »

Jonhello …

For your wife’s 2015 tax return, the amount of the RRSP contributions is the amount that was contributed to an RRSP in the period March 03 to December 31 2015, plus the amount that was contributed in the period January 01 2016 to February 29 2016. Both of these amounts together represent the RRSP contribution in respect of “tax yearâ€￾ 2015.

RRSP contributions, made in the first 60 days of any year, count as part of the contribution in respect of the previous “tax yearâ€￾. So the $3,000 that was contributed in January 2016 is not “forâ€￾ 2016, it is “forâ€￾ 2015.

The maximum that you can deduct on Line 208 on your 2015 tax return is the 2015 deduction limit, if you have at least that much available in current or previously-un-deducted contributions.

You say that the deduction limit for 2015 is $3,901 in this case.

So, if you contributed $1,329 + $3,000 = $4,329 (between March 03 2015 and February 29 2016), then you could deduct $3,901 of this on the 2015 tax return, and carry forward $428 of un-deducted contributions to the 2016 tax return, to be deducted a year from now.

You do these calculations by completing Schedule 7 of the tax return.

I am assuming that the contribution of $1,329 made in 2015 was made on, or after, March 03 2015? If it was made before that, it should have been included on the 2014 tax return.

Luckily, you are allowed to over-contribute $2,000 without paying a tax penalty, so you won’t have to pay a penalty for over-contributing the $428 – you can just carry it forward.

I am taking your case to be as simple as stated in your question – so, unless there are hidden complications, such as other carry-forward amounts, you should be fine.

If you are going to make RRSP contributions between March 01 2016 and March 01 2017, for the 2016 tax year and the 2016 tax return, use the 2016 deduction limit that will be shown on your upcoming 2015 Notice of Assessment, minus $428, when planning your maximum upcoming-year RRSP contributions, to get back to even.

So, what should you do? Read the instructions for Line 208 in the General Income Tax Guide – it is quite easy to read and to follow. It tells you how to fill in Schedule 7. If you want to get into greater detail, read the CRA’s definitive RRSP guide, Publication T4040 – all on the CRA website.
Jonhello
Posts: 59
Joined: Sat Oct 05, 2013 1:28 am

Post by Jonhello »

Thank you for the full response.

I think we misread the "unused rrsp deduction limit" title and have over contributed $1,757. It appears that she was only to contribute $7,572 (2014 - $3,671.00 and 2015 - $3,901.00). She contributed $5,000 in Sept 2014, 1,329 in May 2015 and then 3,000 in January 2016 for a total of $9,329. We didn't realize that January counted as the previous year. However, we appear to under the 2,000 "over-contribution allowed" threshold. Am I correct?


Below is what was copied directly from the website:

2014 RRSP deduction limit is $3,671.00
Minus: Allowable RRSP contributions deducted in 2014 − $3,671.00
Minus: Employer contribution to PRPP for 2014 − $0.00
Unused RRSP deduction limit at the end of 2014 equals: $0.00
Calculation
18% of 2014 earned income of $21,677.00
(Maximum of $24,930.00)
= $3,901.00
Minus: 2014 pension adjustment − $0.00
Minus: 2015 prescribed amount for connected persons − $0.00
Equals: Additional deduction limit based on 2014 $3,901.00
(Amount cannot be less than zero)
Plus: Additional deduction limit based on 2014 + $3,901.00
Subtotal $3,901.00
Minus: 2015 net past service pension adjustment − $0.00
Plus: 2015 pension adjustment reversal + $0.00
2015 RRSP deduction limit equals $3,901.00


Unused RRSP contributions available for 2014 $0.00
Plus: 2014 contributions (including transfers) + $5,000.00
Sub-total $5,000.00
Minus: 2014 HBP or LLP repayments − $0.00
Minus: 2014 deducted contributions (including transfers) − $3,671.00
Unused RRSP contributions available for 2015 $1,329.00
2013 RRSP contribution history

Unused RRSP contributions available for 2013 $0.00
Plus: 2013 contributions (including transfers) + $0.00
Sub-total $0.00
Minus: 2013 HBP or LLP repayments − $0.00
Minus: 2013 deducted contributions (including transfers) − $0.00
Unused RRSP contributions available for 2014 $0.00
nelsona
Posts: 18314
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Post by nelsona »

This isn't a cross-border issue.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
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