What a relief to know that our financial institutions are as sharp as ever. Even as we watch their stock prices melt away before our very own eyes, we know that they are still making every effort to look after us.
After all, how else could one explain their massive advertising campaign, announcing the "tax free savings account" where one could save as much as $50 in tax per year.
On the other hand, the very beneficial tax changes concerning RRIF's seems to be a well kept secret by these very same institutions. In many instances, the tax savings, for 2008, could amount to thousands of dollars.
Very simply, if you have a RRIF, and have withdrawn the minimum amount in 2008, as prescribed by law, then you are eligible to take advantage of this opportunity.
The steps are as follows:
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Determine the amount of your "Minimum Withdrawal" from your RRIF in 2008.
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Calculate 25% thereof.
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Re-contribute, up to this "25%", to your RRIF by March 2, 2009, or perhaps later as explained below.
By doing so, the amount so "re-contributed" will be considered a deduction from your 2008 taxable income.
At the time of this writing, there are two reasonable assumptions which are being made.
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The law was introduced on November 28, 2008, but has not as yet been passed, due to the dissolution of Parliament. It is assumed that the law will be passed, upon reconvening, and that the taxing authorities, will allow the change in anticipation thereof.
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It is assumed that Quebec will allow the same deduction, which would be in keeping with their standard practices of the past. In fact, they have so indicated in a recent press release.
Final Notes:
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If for any reason, the change is not passed into law, the re-contribution could be withdrawn without penalty, according to the Canada Revenue Agency.
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The time limit for making the re-contribution is March 2, 2009 or 30 days after the legislative changes have been enacted by Parliament, whichever date is the later.
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At this time, the proposed change applies only to the 2008 taxation year.
Please contact your Collins Barrow Tax Advisor if you have any questions on any of the above.
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