How does your withdrawal affect your RRSP deduction?
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How does your withdrawal affect your RRSP deduction?
You can continue to contribute to your RRSP or PRPP or both and deduct your contributions from your income on your income tax and benefit return after you have made an LLP withdrawal from your RRSP. However, you may not be able to deduct contributions you made before the withdrawal from your RRSP. The following explains the restrictions that apply.
If you do not have an RRSP, you cannot set one up and then make an LLP withdrawal immediately. The contribution has to be in the RRSP for 90 days before you can deduct it from your income on your income tax and benefit return.
If you already have an RRSP and you contribute to it in the 89-day period before you make an LLP withdrawal, you may not be able to deduct the contribution from your income on your income tax and benefit return even if you repay this amount to your RRSP under the LLP. If the value of the RRSP right after the LLP withdrawal is more than or the same as the amount of the RRSP contribution, you can deduct the entire contribution. If the value of the RRSP right after the LLP withdrawal is less than the amount of the RRSP contribution, you cannot deduct either a portion or all of the contribution.
What cannot be deducted
To find out how much you cannot deduct, use the following formula for each RRSP from which you make an LLP withdrawal:
Total contributions you made to the RRSP in the 89-day period before the LLP withdrawal
Minus:
Value of the RRSP immediately after you made the LLP withdrawal
Equals:
The part of the contributions you cannot deduct at any time
Example
Stephen has an RRSP with a value of $6,500. He contributes $8,000 to the RRSP on February 10, 2021. He then makes an LLP withdrawal of $10,000 on March 1, 2021. The value of the RRSP after the withdrawal is $4,500. Stephen determines the amount of RRSP contributions that cannot be deducted as follows:
Step 1: Calculate value of RRSP after contribution on February 10, 2021.
Value of RRSP before contribution ($6,500) + February 10, 2021 contribution ($8,000) = Value of RRSP after contribution ($14,500)
Step 2: Calculate value of RRSP after withdrawal on March 1, 2021.
Value of RRSP after the contribution ($14,500) − LLP withdrawal ($10,000) = Value of RRSP after withdrawal ($4,500)
Step 3: Calculate amount of RRSP contribution that cannot be deducted.
Contribution in the 89 days before the LLP withdrawal ($8,000) − Value of RRSP after the withdrawal ($4,500) = Amount of RRSP contribution that cannot be deducted ($3,500)
Stephen cannot deduct $3,500 of the contribution he made on February 10, 2021, for any year.
- Date modified:
- 2021-12-13