Last updated: February 11 2009

Make 25% RRIF Recontributions

Most of us are aware that on November 27, 2008 the Government proposed that the minimum RRIF required withdrawal be reduced by 25% for the 2008 tax year. The following should be noted with regard to the RRIF withdrawals and re-contribution amounts.

Changes to RRIFs Payouts could reduce taxes. Registered retirement income funds or RRIFs and the requirement to withdraw certain minimums from them every year. This was of particular concern to many retirees given the financial crisis of late 2008. No one wanted to be required to realize losses because of the financial meltdown if they could afford to wait it out. The RRIF withdrawal rules do not provide for such an option.

For example, if an individual would be required to make a $20,000 withdrawal under the current rules then that minimum amount would be reduced to $15,000 under the new rules.

Taxpayers who have already withdrawn more than the reduced minimum amount would be allowed to re-contribute the excess amount (up to $5,000 in this example) back into the RRIF.

The deadline for recontribution to RRIFs, Life Income Funds or other locked-in RRIFs is the later of March 1, 2009 and 30 days after the proposed rules receive Royal Assent (which has not occurred at the current date). Taxpayers making these recontributions will be allowed to claim a deduction for the amount recontributed on their 2008 returns.

Note that RRIF annuitants who turned 71 in 2008 and who withdraw a minimum amount are not affected by the proposed changes as the 2008 minimum amount for these people is deemed to be nil after changes in the law in 2007.

Therefore significant milestones for the month of March 2009 are the following:

March 2 Age eligible taxpayers with unused RRSP contribution room may make contributions to that plan.

March 15 Quarterly instalment payment due

Later of March 1, 2009 or thirty days after legislation passes (which has not occurred yet) - Recontributions to an RRIF

For more tax tips, purchase a copy of Essential Tax Facts written by The Knowledge Bureau's President, Evelyn Jacks, to learn how to ace your 2008 tax return and save money all year long.