I have a client that is 73 years of age and he was told by his financial advisor and was backed up by CRA phone help that he could still buy spousal RRSP. She is 70
I am wrong to say that he can’t buy any type of RRSP after the age of 71. It was entered into TaxCycle and its not showing up as it coming off his net income.
Did you verify the info from the notice of assessment? You may have to update the Carry-forward information of your client. Klaus
He had no carry-forward on his 2021 NOA. His financial advisor had him buy $4900 in 2022. He was 72 years of age. With only 18,000 in total income in 2022.
Tim Boufford
timboufford@cogeco.ca
If your client puts it in a spousal RRSP, then it’s not his RRSP. It is his wife’s. I’ve recommended this to people who have younger spouses. It’s ok as long as the spouse is under 72.
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Why would you recommend RRSPs if the client can’t use them?
His personal credits will cover the $18,000 and if his wife passes with a lot of RRSPs she might pay a lot of tax on RRSPs for which her husband didn’t get a tax deduction.
But he won’t get the benefit from it. Correct?
Tim Boufford
timboufford@cogeco.ca
He can contribute to a spousal RRSP till his spouse if “over 71 years old”, that would be no more in the year she reaches 72
But he won’t be the tax break on his return correct?
Tim Boufford
timboufford@cogeco.ca
If a person OVER 72 who has a spouse that is UNDER 72…AND had contribution room available, yes, they can make a spousal RSP contribution and yes, it is deducted on the contributor’s return just like any other spousal RSP contribution.
Not sure what the confusion is…this took less than 15 sec to find:
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Why won’t tax cycle then calculate the deduction and tell me he has carryforward his rrsp contribution.
Tim Boufford
timboufford@cogeco.ca
Are you putting the contribution in as a spousal contribution?
Yes I am. Even auto fill put it in there as well. It’s not showing up on line 20800 as a deduction for him.
Tim Boufford
timboufford@cogeco.ca
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On a Gross Income of $18,000 of a Senior in his 70s?
How much of a deduction and reduction were you expecting to apply with that?
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Perhaps the “financial advisor” took off for Belize with the $4,900…
Yes, as Joe pointed out, maybe the optimization in TC is working as it should.
Yes he will
That’s correct, the spouse gets the tax break. It is entered on her tax return not his
Sorry, not “entered” on hers but the deduction is on hers not his
It appears you are using gender coding. If he bought a spousal, the colour should be blue.
Only if he bought his wife an RRSP in her own name (not spousal) should it be pink. She would have signed the paper work, not him for this scenario.
The deduction is for the contributor. Not the annuitant.
So if he is the contributor of the $4,900 and his income is $18,000, then his contribution can’t be used in this year.
Someone with low income will have Federal non-refundable credits of $ 14,398 [basic] + $ 7,898 [age]. Deducting the RRSPs won’t have any tax effect.
Someone may pay for their spouse’s RRSP, but then the spouse is the actual contributor and annuitant.
So again, why would a financial advisor recommend a person with very low income to contribute to an RRSP. Why not TFSA? [providing there is room]
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I can give you two good reasons for doing this that I have used in the past. But first remember doing these spousal contributions is the last kick at the can to get this deduction. My first example is a farmer who had decided he was going to sell out in the next two years he had just turned 72 but wife was four years younger. So we purchased his entire amount of his remaining contribution room as a spousal. We then deducted the RRSP contribution in the year he sold.
Second example (and what might be possible here), again we consumed the entire contribution room (in this case we were able to get both spouses with significant undeducted contributions) ~100,000 each and then over the next 8 to 10 years we used the RRSP deductions each year to get maximum Guaranteed Income Supplement. I think when all the smoke cleared they received more than $150K in supplement.
So bottom line lots to think about.
Jim