First off, let me thank nelsona for all the help and guidance offered. This forum is a great resource and I have thoroughly scoured it.
My wife and I moved to the US many years ago and are now US citizens. I contributed $18,000 to a spousal RRSP before moving to the US and then another $5,0000 after moving here, so a total of $23,000. The RRSP has actually gone down and the current value is $22,300.
I still work but my wife doesn't, and we file a joint US tax return. Besides my employment income, we have a jointly-owned rental property which generates $2600 in net income. We also have medical expenses of $12,000 (including premiums).
We'd like to cash out the spousal RRSP and bring the money to the US, so here's how I think it should work out:
Canada:
1. Withdraw the entire balance ($22,300) from the RRSP. RRSP manager will withhold $5575 (25%).
2. File a Section 217 return:
- Income from outside Canada: $1729 (her half of $2600 rental income, converted to CAD)
- Income from Canada: $22,300
- Canada to worldwide income ratio: 92.8%
- Deductions: personal amount = $11,635, medical expenses = $15,960 ($12,000, converted to CAD)
- Net income = $0, refund = $5575
US:
Claim a loss of $526 (loss on RRSP, converted to USD)
Questions:
1. We're both under 65 years old. Isn't there any penalty for early withdrawal from the RRSP?
2. Is the 23% non-resident rate correct? I saw it in a forum post from 2008.
3. Can my wife deduct the medical expenses for the entire family? My daughter is 18, but we also have 2 other younger kids.
4. Any errors, omissions or suggestions?
Thanks!
Non-working spouse cashing out RRSP
Moderator: Mark T Serbinski CA CPA
Sounds good.
Of course, you will need to determine the USD values of each contribution that was made, in USD at that time, as well as the USD value of the entire withdrawal when that is done. That will determine what your actual gian or loss is for US purposes.
Any loss cannot be claimed on line 16. It can only be claimed as a terminal loss of a retirement fund, which is a schedule A deduction.
1. no
2. About that. When you do the 217 you will do the exact calculations. Ufile.ca does a good job with 217. Since the tax in 23%, but regardless, as you have likely correctly concludes, the tax rate on zero net income is zero.
3. All medical expenses of the family can be included, and the excluded threshold if based solely on her income.
Of course, you will need to determine the USD values of each contribution that was made, in USD at that time, as well as the USD value of the entire withdrawal when that is done. That will determine what your actual gian or loss is for US purposes.
Any loss cannot be claimed on line 16. It can only be claimed as a terminal loss of a retirement fund, which is a schedule A deduction.
1. no
2. About that. When you do the 217 you will do the exact calculations. Ufile.ca does a good job with 217. Since the tax in 23%, but regardless, as you have likely correctly concludes, the tax rate on zero net income is zero.
3. All medical expenses of the family can be included, and the excluded threshold if based solely on her income.
After 20 years, I am severely cutting back on responses. Do not ask specifically for my help. There are a few others on this board that can answer most questions. All the best
Thanks for the quick reply. Yes, I'll definitely check out Ufile.ca when I've got the real numbers.
Yesterday I downloaded all the transactions from the RRSP manager so I know the exact dates of all contributions (25, in total) Should I use the Bank of Canada USD exchange rate for each contribution date, or the Dec 31st exchange rate for each contribution year? Splitting hairs at this point, but I'm curious what you recommend.
Yesterday I downloaded all the transactions from the RRSP manager so I know the exact dates of all contributions (25, in total) Should I use the Bank of Canada USD exchange rate for each contribution date, or the Dec 31st exchange rate for each contribution year? Splitting hairs at this point, but I'm curious what you recommend.