If you received a 2015 T4RIF form with an amount using the old minimum withdrawal rate and you have re-contributed the difference between it and the new rate, how do you make sure that you only pay taxes on the new withdrawal rate?
In the 2015 Federal Budget, the minimum withdrawal rate from Registered Retirement Income Funds was reduced significantly. You can view the new rates at RRIF Minimum Payout – 2015 Rates. An analysis of the rates is given in RRIF Minimum Payout – 2015 versus Old Rates.
As always, if you are required to withdraw at least a minimum based on your age from your RRIF and the amount will be shown on the T4RIF form that you receive from your financial institution.
If your 2015 withdrawal was at the old rate, the federal government provides the option of re-contributing the difference between the old rate and the reduced 2015 rate back into your RRIF. However, you had to do it by February 29, 2016.
If you did re-contribute, you will likely still have received a T4RIF for the old withdrawal rate. Clearly, this is not what you want as you will then have to pay taxes on more than you actually received.
However, there is a way to overcome this and only pay on the reduced 2015 rate.
According to the Canada Revenue’s General Income Tax and Benefit Guide 2015, on page 37, you can claim the re-contributed amount as an “Other deductions” at Line 232 of the T1. (You can view the tax documents at the Federal website. The ones you want are 5000-G General Income Tax and Benefit Guide 2015 – All Provinces Except Non-Residents and 5000-R T1 General 2015 – Income Tax and Benefit Return. You can view them online or download a pdf file.)
Because you claim the full amount of the T4RIF income at Line 115 (Other pensions and superannuation) and then deduct the overpayment at Line 232, the effect is that the Taxable Income at Line 260 is for the new 2105 rate.
You should receive a letter from your financial institution indicating the re-contribution. Use this amount in Line 232. If you file your income taxes by paper, send it in. If you file electronically, keep it with your other forms.
If you did not receive a letter, you should ask for one. In the meantime, you can determine the amount to be used at Line 232 by checking your RRIF transactions. If you do this online, it will be easy to see the re-contribution. If done by paper, it should be on one of your statements.