Why does my husband's amount owing increase when I decrease my RRSP contribution but my amount owing stays the same?

[jackiel]

I contributed more to my RRSPs than necessary to reduce my taxes. When I adjust my contribution (in order to carry forward some of my contribution to next year) my tax owing does not change but my husband's tax owing increases. 

Why does it do this?

Should I claim all my RRSP contribution this year, even though it won't save me more money in order to save my husband money? Or should he pay more tax this year so I can carry forward some RRSP contribution to get a head start for next year?

[TurboTaxZaid · Accepted solution]

@jackiel when you look at the spousal transfers that you are claiming, you can see which amounts are being transfered over to your husband. That way you can make the decision that is best for you on when or how to claim your RRSP contributions. 

[jackiel]

Zaid, thanks for replying but you didn't answer my questions and your reply does not make sense. I am NOT making any spousal transfers, or at least not deliberately. Does TurboTax make transfers for me automatically? If so, where do I see them?

[TurboTaxZaid]

Sorry about that. After revisiting the question I think I have a better answer for you.

What could be happening is that your taxable income is so low that when you are deducting your RRSP, it makes your taxable income fall below the basic personal amount (this around $10,000 that every tax payer is given). If that is the case, the amount that your taxable income falls below the basic personal amount will be reduced from the spousal taxable income, thus reducing your husbands tax owing.

If this is the case, it means that you are getting the least possible tax savings from your RRSP contributions (since you would be at the lowest tax bracket). Whereas if you are in a higher tax bracket, you would receive more benefit from the RRSP deduction.

Does this answer your question?

[jackiel]

Thank you Zaid, that makes sense now. I'm self-employed and had a lot of unexpected expenses at the end of the year so my RRSP contributions turned out to be higher than necessary.

Part 2 of my question: I need to figure out if my husband and I will save more money in the long run if I carry forward some of my RRSP contributions to next year or not. For argument's sake, let's say I can carry forward $5000 to next year and it won't change MY tax owing this year, but it will mean my husband has to pay more taxes this year.
I can see exactly how much more hubby will pay this year by changing my RRSP numbers in TurboTax. But I don't know how to estimate the impact that $5000 will have on my taxes next year. If I simply multiply $5000 x the tax bracket I anticipate being in next year, will that give me a ballpark amount?
Thanks again.

[TurboTaxZaid]

I am glad I could help!

RRSP tax benefits can be more complicated than that, a good way to find out the potential savings is to use a tax calculator. We have one on TurboTax here: https://turbotax.intuit.ca/tax-resources/canada-income-tax-calculator.jsp

You can use this to get an idea of how much tax savings you will receive due to your RRSP contributions in the future.

[jackiel]

Thank you!

[TurboTaxZaid]

My pleasure!