In the article Optimize Your RRSP: Contribute Now, Claim the Tax-Reducing Deduction Later I discussed some of the reasons why you might want to make your RRSP contribution but wait a year or two before claiming the deduction on your income tax. Here’s how to file your taxes to report your RRSP contribution and defer the tax deduction.
In this article, I briefly describe how to report your RRSP contribution and deduction information on your tax forms. Please double check that your tax return is filled in correctly with a tax professional or the CRA if you have any doubts. I am not a tax professional. I’m just a tax payer.
How Do I Report That I Don’t Want to Take the Tax Deduction for my RRSP Contribution Yet?
You *MUST* report your RRSP contributions for the year on your tax return for that year.
If you want to claim a tax deduction for your RRSP contributions immediately, you just write the total amount you contributed on Line 208 of your return.
If you do *NOT* want to claim a tax deduction for the entire amount of your RRSP contributions immediately, you *MUST* fill out Schedule 7.
How to Use Schedule 7 to Defer Taking the Deduction for your RRSP Contribution
Read the instructions on Schedule 7 carefully.
If you’re using tax software and you can’t actually see Schedule 7, take a look at it on the CRA website, or pick up a paper copy of the form from your nearest Post Office. The forms are available from the CRA website at http://www.cra-arc.gc.ca/formspubs/. Schedule 7 is a form in the booklet “Forms 2012 T1 General Ontario” or a similar name for your year and province or territory.
Completing Schedule 7
in Part A you report
- Any RRSP contributions you have made in other years that you have not claimed the deduction for (These were reported to you on your last CRA Notice of Assessment.)
- Any new RRSP contributions you have made
- from March to December of the tax year
- from January and February of the new year
In Part B you report
- Any repayment you are making to your HBP
- Any repayment you are making to your LLP
In Part C you report
- Any transfers you are required to make
- Your total RRSP contributions that are available to deduct from your income
***the amount you are going to claim for your tax-reducing deduction this year***
- that’s the line where you want to report zero, 0, if you want to carry all of your deduction forward and use it another year; or
- where you want to report a smaller number than your contribution, if you want to carry some of your deduction forward and use it another year
- As the schedule says, you then report the calculated amount you are claiming this year to reduce this year’s taxes on Line 208 of your return. If you are not claiming any of your RRSP contribution this year, you report zero, 0, on Line 208.
In Part D you report
- The amount of your RRSP contributions that you want to carry forward and use to make a deduction in a future year
- That’s the number you are going to claim for a tax refund next year or later.
In Part E you report
If relevant, how much you took out of your RRSP for
- Your HBP
- Your LLP
If you have filled out Schedule 7, and reported either zero or the smaller amount you do want to deduct right away from your taxes to get a refund on Line 208, then you have completed the necessary work.
Remember if you report 0 on line 208 you MUST complete a Schedule 7 to report your RRSP contributions for the year. Don’t break the law and get fined by accident!
Always Check with the CRA If In Doubt
I’m a tax payer, not a tax professional. You must double check your tax return with the CRA or with a tax professional if you have any doubt about how to report your RRSP contribution and deduction. I can’t provide tax advice or check your forms and I am not responsible if you make a mistake. I’m just describing what worked for me.
- Optimize Your RRSP: Contribute Now, Claim the Tax-Reducing Deduction Later
- RRSP Strategies Part 1: How To Best Get your RRSP Money Contributed Before the Tax Deadline
Have you ever deferred taking the deduction for your RRSP contribution? Did you wait one year or more? Was it the right decision? Please share your experiences with a comment.