RRSP Q&A: I'm a student, should I use the RRSP deduction now? - MoneySense

RRSP Q&A: I’m a student, should I use the RRSP deduction now?

Answers to your RRSP questions.

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From February 16 to 19, 2010, MoneySense.ca’s top financial planners are answering your RRSP questions. For the full list of questions answered — or to submit a question of your own — click here.

I’m a recent graduate student. I’m claiming tuition for tax purposes (that my parents paid), which is somewhere between $6,689 to $9,331. My net income for 2009 was about $6,000 and I contributed about $500 in 2009 towards RRSPs. The question is, am I better off claiming the RRSP for 2009 tax year or should I carry it over for next tax year? —Sarah

Karin Mizgala: There are two issues here.  If you earned only $6000 in 2009, your personal credit of $10,320 will wipe out any tax that you have to pay for 2009.  You won’t even have to use your tuition credits.  This means that you can transfer up to $5000 of the 2009 tuition credits to one of your parents if you so choose.  If you decide not to, you can carry them forward to a future year when you have higher income and when it will make a difference.

In addition, you will not need to use the RRSP deduction.  You must report it on Schedule 7 on your return as contributed for 2009 but don’t claim the deduction and carry it forward to a future year when you have higher income.

Next question: I’m thinking of cashing my fund in and buying a bond ETF. Is that a good idea?

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