Withdrawing from an RRSP

by in Tax Advice Information and Updates
Withdrawing from an RRSP
When withdrawing from your own RRSP: You can withdraw amounts from your RRSP before it starts to pay you a retirement income. You can withdraw unused contributions you made to an RRSP based on an approved Form T3012A Tax Deduction Waiver on the Refund of your Unused RRSP, PRPP, SPP Contributions from your RRSP.

You will also need to report your RRSP income on line 129 of your tax return and claim the tax deducted from box 30 of your T4RSP slip on line 437 on your tax return.

Withdrawing the unused contributions: If you did not deduct all the contributions you made to your RRSP, PRPP or SPP or your spouse’s or common-law partner’s RRSP in 1991 and later years, you can either leave the unused contributions in the plan or withdraw the unused contributions.

In either case, you may have to pay a 1% per month tax on the part of your unused contributions that are excess contributions.

If you withdraw the unused contributions, you have to include them as income on your tax return. However, you may be able to deduct an amount equal to the withdrawn contributions that you include in your income if you or your spouse or common law partner received the unused contributions from an RRSP, PRPP, SPP or RRIF:
- In the year you contributed them;
- In the following year;
- In the year that you were sent a notice of assessment or notice of reassessment for the year you contributed them, or in the following year.

Tax rates on withdrawals: When you withdraw funds from an RRSP, your financial institution withholds the tax. Note that the rates will depend on your residency. If you are a Canadian resident, the following rates will apply:

- 10% (5% in Quebec) on amounts up to $5,000
- 20% (10% in Quebec) on amounts over $5,000 up to $15,000
- 30% (15% in Quebec) on amounts over $15,000.

It is important to note that the tax withheld may not always be enough to account for the tax you owe at your tax bracket. If this is the case, you may need to pay more tax on the withdrawal when you include the withdrawal on your tax return.

Source: https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/rrsps-related-plans/making-withdrawals.html
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Guest Monday, 18 March 2019