Friday, 21 December 2012

The Last RRSP Contribution of a 71 Year Old

As you may know any individual that reaches age 71 in 2012 will have to collapse its RRSP in 2013 or transfer the balance to a Registered Retired  Income Fund.  If a 71 year individual has earned eligible income, such as employment income, net rental income, self employment income in 2012 he or she has created RRSP room for utilisation in 2012.  In other words he can  - if his age permitted him - contribute to his RRSP in 2013. But he cannot, because he has reached 72  in 2013 and does not have a RRSP to contribute to. There is a technique which allows him to use up he 2013 RRSP room and not get it to go to waste.  What he can do is to over contribute up to his allowable RRSP room in these last few days of 2012.  Of course one has to consider whether one can use the deduction available in 2013. In other words has one enough taxable incomein 2013  to use the deduction or can one create taxable income.  In cases where one has a holding company and retained earning the best strategy is to pay a dividend in 2013 and use up the deduction.

Get more tax information and Q&A letters from our website www.tavana.ca

This blog is for general information only and cannot replace professional advice.
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