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December 31 is an Important Date for Your RRSPs

rrspYou’re probably aware of the March 3, 2014 deadline for RRSP contributions to apply the deduction against your 2013 taxes, but are you aware that December 31 is also a significant date when it comes to your RRSPs?

Be sure you don’t have any non-qualified investments in your RRSP

If you have a self-directed RRSP, you may have unknowingly purchased assets which don’t qualify, referred to as non-qualifying investments.

CRA penalizes you a tax equal to 50% of the amount of the non-qualified investment.

If you dispose of the asset before December 31 the tax will be refunded.

What’s a non-qualified investment?

It’s a bit circular, but CRA’s definition for a non-qualified investment is “any property that is not a qualified investment for the RRSP.”

The CRA definition for a qualified investment is “an investment in properties, including money, guaranteed investment certificates (GICs), government and corporate bonds, mutual funds, and securities listed on a designated stock exchange.”

Wait until after December 31 for a RRSP Home Buyers’ Plan Withdrawal

If you plan on using the RRSP Home Buyers’ Plan wait until after December 31 as this will defer your first repayment by one year.

You can borrow up to $25,000 tax-free from your RRSP to purchase a principal residence. Amounts withdrawn are repaid to your RRSPs in 15 equal instalments starting with the second taxation year following the year of withdrawal.

Contact a financial advisor to learn more about these RRSP options.