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RRSP Contribution for 2014 Tax Year

    The 2014 RRSP contribution deadline will be March 2, 2015 or 60 days into the New Year.  The maximum contribution limit for the 2014 RRSP contribution is $24, 930 on the top end of the scale. This limit will be based on the individual income for the year of 2014.  An RRSP can be set up at most banks, credit unions, trust or insurance companies; consultations with the aforementioned businesses will result in information on the types of RRSP and the investments offered.

    There are benefits to creating spousal or common-law partner RRSP as a higher income partner can contribute into the lower income spouse’s RRSP and receive a tax break. In retirement, the annuitant is typically going to be in a lower tax bracket and will report the income on their taxes.

    The benefits of the RRSP

    One benefit of the RRSP is that it allows the employed Canadian to have a tax-free investment which gains compound interest.  In addition, all the deposits that were made until March 2, 2015 can be deducted from the income of the taxpayer for the 2014 tax year.  This will result in a tax deferral for the individual. This comes into play after retirement as the individual will most likely be in a lower tax bracket and they will be taxed less than they would be during their working years.

    Standard RRSP rules apply for the 2014 tax year including the RRSP contribution carry over.  The carry over is applied to the unused contribution limit for 2013 contributions, This will benefit younger workers who ,as their income reaches a higher tax bracket , may use the deductions for previous years worked when they made no contributions.

    These contributions could have been deposited from 1991-2013 with some limitations as to what money can and cannot be deducted.  The contribution limit will remain at $0 if the 2014 tax return was not filed.  To correct having a $0 limit for RRSP contributions the individual must file the 2014 tax return.  The age limit is currently 71, meaning that the last contribution can be in the year that the individual has turned 71 by December 31.  Individuals that are over the age limit may still contribute into a spouse’s or common-law partner’s RRSP.

    The individual investor must be cautious about the tax-free RRSP withdrawal plans. The Canadian Revenue Agency (CRA) is cracking down on these illegal methods of withdrawing money from RRSP.

    To date, there have been over 5000 individuals reassessed for partaking in these schemes resulting in over 250 million in reported income.  These schemes involve the tax free withdrawal of money from an RRSP, immediate access to locked in RRSP, income tax receipts providing deduction of up to three times the actual deduction and unrealistic returns on investment.

    Taxpayers should avoid these risks as they may end up losing their entire investment or the amount of the withdrawal will be included into the taxpayer’s income resulting in a large interest or penalties from the CRA.


    Christopher - BSc, MBA

    With over two decades of combined Big 5 Banking and Agency experience, Christopher launched Underbanked® to cut through the noise and complexity of financial information. Christopher has an MBA degree from McMaster University and BSc. from Western University in Canada.

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