Tax Tips: If You Withdrew Funds from a RRIF, Check With Your Advisor Now

Did you know that beginning with the 2015 tax year, the minimum required taxable withdrawal from a Registered Retirement Income Fund (RRIF) was reduced? Did you claim the amount correctly on your 2015 tax return as a result?

This change affected taxpayers between the ages of 71 and 94. Specifically, at age 71, the minimum withdrawal rate was reduced from 7.38% to 5.28%. The result is that seniors can keep their RRIF accumulations sheltered for a longer period of time and have greater flexibility over the way the money is withdrawn.

Seniors who had already withdrawn more than the new required minimum from their RRIFs in 2015 were allowed to return the amount in excess of the new minimum (but not any amounts in excess of the old minimum) to their RRIFs for 2015. But you had to do so by February 29, 2016.

If you did re-deposit the excess withdrawal to your RRIF, you’ll be able to claim a deduction on line 232 for the re-deposit.  This will offset the amount shown on your T4RIF slip which will include your full withdrawal.  While technically, this repayment should reduce your pension eligible for the pension income amount and for pension income splitting, the forms have not been updated to adjust for this repayment so the full withdrawal amount will be eligible for the pension income amount and for pension income splitting.

If you’re planning retirement income, either for yourself or for a client, you may find the Tax Efficient Retirement Income Planner useful.  Sign up for a free trial today.  Advisors who want to take a deeper dive into retirement income planning are invited to attend the May Distinguished Advisor Workshop: After the Budget: Tax-Efficient Retirement & Estate Planning coming to Winnipeg, Calgary, Vancouver and Toronto.

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