Q Last year, my wife and I were unable to contribute to our Registered Retirement Savings Plan (RRSP) because we moved into our first home. There were more unexpected closing costs and home upkeep. If I borrow from our line of credit, can we deduct the interest if invested into RRSP? What if I sold off or transferred non-registered stocks for RRSP stocks? I would have a loss on the shares.
Ron and Aileen
A. Fortunately, bank and financial institution ads help us not forget March 1, 2010 is the RRSP contribution deadline for a 2009 tax deduction. Many first-time homebuyers are generally recovering the first year of moving into their dream home because they had not anticipated some closing costs and expenses to maintain a home. The federal government recently invoked many changes to home qualification with the intent of reducing default by some naïve homeowners.
Interestingly, many taxpayers are unaware of the new homebuyers tax credit — a federal tax credit to help first-time buyers ease the burden of closing costs. Unfortunately overshadowed by the home renovation tax credit in the last budget, very few taxpayers are aware of its existence. You are a first-time homebuyer. Do not forget to make your claim.
Interest is not deductible for funds borrowed to purchase RRSPs. Losses on the sale of shares would generally allow a taxpayer to claim a capital loss. However, the sale of shares (or transfer) and subsequent re-purchase of same within a 30-day time frame that result in a loss could be denied by Canada Revenue Agency. Commissions aside, if you sold the non-registered shares and used the money to purchase shares (passed 30 days or other shares) in RRSP, then used the line of credit to buy non-registered shares, the interest may be deductible and capital loss can be claimed.
