Spousal RRSP Attribution Rules

Spousal RRSP Attribution Rules

Spousal RRSP's are a great way to equalize retirement assets when one person has a significantly higher income level.

If a spouse or common-law partner contributed to your spousal RRSP in the current or preceding two tax years then they may have to claim any withdrawal as income in the current year.

For example person X makes significant income while person Y does not earn an income.

Let's assume that both people have not assets for the ease of this illustration.

Person X can make a contribution to a spousal RRSP setup and owned by person Y.

Let's say that X has a personal RRSP and Y has a spousal RRSP. X may want to split that year's desired RRSP contribution 50/50 and contribute equal amounts to the personal RRSP and the spousal RRSP.

This will allow each person to have equal assets heading into retirement (assuming the rates of return are the same) however only person X will receive a contribution tax receipt.

Let's say that person Y wants to withdraw from the RRSP. If X made a contribution to the RRSP in the current year or preceding year then they will likely have to include this as income.

For example if $10,000 was contributed in 2X00, 2X01 and 2X02. If $5,000 is looking to be withdrawn in 2X03, then person X will likely have to include the $5,000 withdrawal as income due to spousal RRSP contribution rules even though it came from an account in the name of person Y.

Please note that everyone's financial circumstances are different and decisions should be made based on your personal finances. This is not to be construed as financial, tax or legal advice and is for educational purposes only. You are advised to seek consult of a qualified professional prior to making any decisions.

This article was last updated 2021-10-07
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