Asked
What is the best way to cash in RRSP's if you are starting a business?
(I'm not starting a biz - just brainstorming finance options with a friend who wants to)
Clint’s answer
Thanks, Lisa.
There are withholding taxes which are deducted at the source. This means they will be held back and remitted to the CRA prior to the recipient receiving the said amount. When it comes time to calculate and file taxes in the following year after the withdrawal, the taxpayer/recipient will either pay more, receive a refund, or break even so-to-speak.
There are personal deductions etc so these figures aren't to be taken too literally, but withdrawing anything above the thresholds (for instance if the recipient is in BC, anything above $47,937 will be subject to a 2.64% increase in every dollar received up to $95,875.)
Federal same system and the taxes to be paid will be the combination of both the BC tax and the Federal tax, so yes, eventually more than 50% of each dollar withdrawn could be owed to the government. OUCH!
Does this help?
January 16, 2024
From Ask Clint: real questions from a Canadian public finance forum, answered by Clint Cole. Names are changed. This is general information, not advice for your situation, and rules and dollar figures may have changed since Clint answered. Terms