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Hi--I have sold my house and my proceeds are tax free and currently sitting in a savings account. People are telling me to put it in my RRSP. I think it is better to keep it in non-RRSP investments since it is tax free to start with and when I take it out of the RRSP eventually, I will have to pay tax on it. Any thoughts? Thanks
 

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When you contribute to RRSP, the contributions are income tax sheltered

Even if you have "tax free money", that money would simply replace the contributions from your "income taxed money" right?

Also any interest you currently make on that "tax free money" is 100% taxed unless you put in a TFSA
 

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Daisy: What are your plans for the money? Do you plan to purchase another house? Fund your retirement? Your goals will ultimately determine where to best put the money.
 

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This could require some in-depth analysis of your economic circumstances. But in principal, if you have taxable income now, you should probably contribute to your RRSP so you can reduce your current taxes. Whether the contribution comes from your "tax-free" house profits or from your taxable earned income is just a matter of semantics - it's coming out of the left pocket instead of the right.
 

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Yes, ultimately the decision would be made based on when you would be in need of that money.

If you don't need it until retirement, RRSP.

If you will need it in 6 months/or short term, put 10K into your TFSA, and leave the rest in a non registered acct.
 

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In deciding whether it makes sense to contribute to RRSPs, the source of the money is absolutely irrelevant. It makes no difference whatsoever.

Presumably you have a job, and are not just living off the proceeds of your sale … if you have a job, then you have income … an RRSP contribution would be deductible against that income, or any other income you might have …

There are a lot of factors involved in deciding whether RRSP would be an appropriate course of action in your case, but your concern that the proceeds are tax-free is unfounded.
 
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