B4 - Wednesday, October 31, 1984 - North Shore News Ei business Exceptions to those RRSP rules OST people are aware of the ‘‘Spousal RRSP”’ rules permitting a taxpayer to contribute to a RRSP for his or her spouse and obtain a tax deduction. For example, a hus- band who works, puts money into a RRSP for a wife who doesn’t work, and builds up a pension fund for her which will eventually be reportable but not necessarily taxable in her name. This income- splitting device is fairly well known. What is not so well known is that a taxpayer over 71 can continue to get a RRSP tax deduction provided the con- tribution is for a spouse who has not yet reached that age. Here is a recent example: Husband aged 72 and wife aged 60. The husband receives several pensions: Old Age Security, Canada Pen- sion, and a company pen- sion. All of these ttems quajify as ‘‘earned income’’ fa RRSP contribution p es. wfbeses. has other in- come from investments, etc and his marginal rate of in- come tax 1s “aboyw 36%. Although he cannot con- tribute to his own RRSP, he can contmbute to a plan for his wife Let's assume that he con tributes $2,000 a year to her RRSP This will reduce his income tax by $720 a year After 5 years, he will have saved a total of $3,600 in in come taxes. By then, his wife would be 6S and, at present rates of in terest, should have appro. tmately $13,000 in her RRSP At today’s rates, this would buy her a pension tnceome ol close to $2,000 a year, of which $1,000 would be com pletely tax free as ‘‘quahfied LOGO DE SIGN ° pension income.’”’ If her only other income is the Old Age Security, then the balance would probably escape tax also. This is all perfectly legal and spelled out in detail in the Income Tax Act and in the Government’s own booklets on retirement plann- ing. In the example quoted above, this married couple saved $3,600 in taxes over the § year accumulation period and created close to $2,000 a year Of tax-free pension, in- come for the wifes-A ‘httle planning can gaye a lot of money! . se 8 Our thanks to a reader who called in to point out that it ts not necessary to roll over the British pension to claim the pension income deduction This 1s correct’ However, where the pensioner already qualifies for the maximum deduction, rolling over the Britush pension shelters it from current taxation Bert Wickham is one of B.C..’s foremost authorities on financial planning for retirement. This series of ar- ticles is designed to help vou make the most of your ia come in retirement and keep our taxes to the legal intimam. 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