Delean: Questions about moving back to Quebec, when to draw down RRSP


Other readers asked about listings for “undivided” multi-unit buildings and exchange rate calculations for tax-reporting sales of U.S. stocks.

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Pulling funds from a Registered Retirement Savings Plan (RRSP) and the tax implications of a move back to Quebec from the United States were among the topics raised in recent letters from readers. Here’s what they wanted to know.

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Q: I retired this past May and will be 67 in December. I​’m receiving a work pension of about $13,000 annually; my wife is still working. I haven’t applied for Old Age Security or Quebec Pension Plan yet, intending to wait until age 70 (to receive the enhanced amounts). I have $76,000 in my TFSA and savings that I can dip into, but I’m thinking the best strategy for the next couple of years might be to draw down my RRSP (currently worth $330,000) by about $32,000 a year so my (taxable) income would come in around $45,000. What do you think?

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A: I think it’s an excellent plan. The $45,000 mark is where the provincial tax rate rises to 20 per cent from 15 (the federal rate jumps to 20.5 per cent from 15 at $49,000), so that’s where the elevated tax rates Quebecers endure really start to bite. RRSPs are basically a large pool of savings that get taxed on the way out, so you want them to exit in the most tax-efficient way possible, and that doesn’t necessarily mean waiting until age 71 when you’re obliged to do it. When your wife stops working, you can look at splitting pension income (including QPP) as a means of minimizing household taxes. Maximizing the TFSA, as you are doing, also will give you a financial cushion in retirement.

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Q: I’m 72, a Canadian with a green card who’s been living in the United States, and I want to move back to Quebec in the next year. What notifications, if any, do I have to give the tax departments, or do I simply indicate on my tax returns that I’m back? I get (U.S.) Social Security in addition to my Canadian pensions and also have a 401k (the U.S. equivalent of an RRSP). How is that handled on the tax side in Canada?

A: It might be a useful exercise, pre-move, to plug in some of your recent tax information to Quebec and federal tax returns, so that you have a clear idea of the financial implications. You don’t need to advise the revenue departments until your tax filings for the year of your return, but all your income sources in Canada and the U.S. should be notified of the change in your residency status. A 401k owned by a Canadian resident is considered a pension plan, so income that accrues inside it is not taxable, but disbursements from it are. U.S. Social Security benefits are taxable here, but eligible for a 15 per cent deduction on the Canadian return under the Canada-U.S. tax treaty. Old Age Security and Quebec Pension Plan are taxable income here. For the year of your return, you’ll be taxed on worldwide income as of the date you resumed residing here.

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Q: I’ve noticed several real estate listings recently for multi-unit buildings that were “undivided.” What does that mean?

A: It means the property is considered a single entity, even if the units are separate, and buyers actually acquire a fraction of the whole (usually determined by the size of their unit) rather than an actual space of their own. Because of the particularities of the arrangement, the Chambre des notaires du Québec recommends that there be a written agreement among the occupants spelling out the terms of their co-ownership so there are no misunderstandings on, say, renovations, resale or shared fees. On its website, the Chambre also notes that if, for instance, one of three co-owners of a building fails to acquit his or her share of the tax bill, the others will have to cover it. Insurance options may also be limited, since relatively few companies offer coverage.

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Q: I have some U.S. stocks that I have owned for a very long time. What exchange rate do I use for tax-reporting purposes when I sell them?

A: First stop is the Bank of Canada website, where you look for the average annual exchange rate for the year of acquisition. If you can’t find it there, Canada Revenue Agency also will accept the average rate for that year calculated by Bloomberg L.P., Thomson Reuters or OANDA Corp.

The Montreal Gazette invites readers’ questions on tax, investment and personal finance matters. If you have a query you’d like addressed, please send it by email to Paul Delean at gazpersonalfinance@hotmail.com

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