If I contribute to my RRSP and then withdraw from my RRSP, does it effect my contribution limit for the year? Is it deductible?
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Our response:
To answer this question, we will have to separate contributions to an RRSP, and withdrawals from an RRSP.
Contributions to an RRSP are tax deductible. You must have contribution room available. You can see your contribution room on your latest Notice of Assessment, or by contacting the Canada Revenue Agency (CRA). Learn more about RRSP contributions.
You can withdraw money from an RRSP, however withdrawals are fully taxable in the year they are made. You will also permanently lose the contribution room you used to make the original contribution. Special programs allow for tax-free withdrawals – for example, the Home Buyers’ Plan if you are purchasing your first home – but these funds must be paid back within a certain time period or they become taxable as well. Learn more about RRSP withdrawals.
If you want your savings to grow tax-free but also want to have some flexibility to withdraw money, you may consider looking into setting up a TFSA. Understand the rules for TFSA contributions and withdrawals before you open an account. Learn more about TFSAs.