Guest mdhopeful23 Posted April 13, 2004 Report Share Posted April 13, 2004 so let me just break this rrsp thing down to fit in my brain... if you put your money in a rrsp, you get a tax deduction. basically, you end up being able to keep your 'gross' income amount, since the deduction equals what they took off your income for taxes. then, when you need the money for school, you can withdraw it (up to 10 grand per year) and still not pay any taxes on it kirsteen, am i correct in my breakdown? if so, that's a pretty good deal. do you go to a bank and set this up? i'm not sure i'd have the cash to do this, but its something to consider not that i'm looking at all my finances... ah, so many things to think about in terms of finances. all these things that were 'gibberish' adult talk now apply to me...we're growing up folks, we're growing up :rolleyes :lol Link to comment Share on other sites More sharing options...
Guest aneliz Posted April 13, 2004 Report Share Posted April 13, 2004 Also be warned that OSAP will expect you to dispense with any investments, stocks, GIC's, RRSP's etc that you may have before they will give you any OSAP...you are expected to deplete all of your investments before you are deemed to be 'needy' enough! Link to comment Share on other sites More sharing options...
Guest Kirsteen Posted April 13, 2004 Report Share Posted April 13, 2004 Hi there, If you can understand organic chemistry then RRSPs should be a breeze. Yep, mdhopeful23 you've pretty much got it. A few more details: if you place money in an RRSP then whatever you contribute shall be deducted from your taxable income, thus, you won't be taxed on that contributed amount. However, everyone is permitted to contribute up to a certain maximum amount of money per year to an RRSP. This is calculated based on your previous year's income, and the yearly maximum currently sits at ~$13,000. When you need the money for school, you withdraw it under the LLP and you will not be taxed on the amount that you withdraw (up to $10,000 per year). You have a certain amount of time to pay the withdrawn amount back, and only if you fail to repay the full amount back into your RRSP after that time, then it will be considered income for that year, and thus taxed at whatever rate your tax bracket may be that year. Yes, you would approach a bank to establish your RRSP and then fill out the forms to withdraw funds under the LLP. Cheers, Kirsteen Link to comment Share on other sites More sharing options...
Guest mdhopeful23 Posted April 13, 2004 Report Share Posted April 13, 2004 a little confused with two statements: 2) you can transfer all of your stocks into the account thereby shielding them from inclusion in your OSAP assessment; but then aneliz wrote: Also be warned that OSAP will expect you to dispense with any investments, stocks, GIC's, RRSP's etc that you may have before they will give you any OSAP oh dear. which is correct? Link to comment Share on other sites More sharing options...
Guest Kirsteen Posted April 13, 2004 Report Share Posted April 13, 2004 Hi there, From my own experience, unless OSAP has made some fairly large mistakes over the past two years, I have a good bit of money stored away in my RRSPs. I've declared my true RRSP balance on my OSAP applications and there has been no problem receiving OSAP assistance. In fact, this was an item that I spoke with one of the UofT Financial Aid folks about and she mentioned that RRSPs are not factored into the OSAP decision. Unless OSAP have made some recent changes to their policies, I hope this remains to be the case. Cheers, Kirsteen Link to comment Share on other sites More sharing options...
Guest bananacreampie Posted April 13, 2004 Report Share Posted April 13, 2004 Hi, I am finding this whole discussion very interesting, however, I am assuming that OSAP is only for Ontario residents. Is there an equivalent program in Alberta? When does it have to be applied for? I feel like I should be giving away everything I have now (not that I have much). Either way I was planning on buying a cheap car this summer, but maybe I'll just give the money to my parents and get them to buy it? Any help would be appreciated, thanks, bcp Link to comment Share on other sites More sharing options...
Guest therealcrackers Posted April 13, 2004 Report Share Posted April 13, 2004 I think they include your RRSP balance in their calculations for OSAP. I got significantly less OSAP than the maximum (and I am more than 5 years out from high school, by a Long shot!) my first year, and a little less than the max the second year. This was probably due to my rolling my RRSPs into an LLP, about 60% the first year, and 40% the second year. The kicker as far as the RRSP tax shelter goes, is that if you use it for an LLP, you have to pay back the initial amount you have used within 10 years of your initial withdrawal. Otherwise, that amount gets taxed at your tax bracket for that calendar year (ie. withdrawal + 10 years) and you have to pay it. That'll be right at the end of residency, or first year consultancy, so a much higher tax bracket than when I socked it away as a grad student... Link to comment Share on other sites More sharing options...
Guest DonaldKaufman Posted April 13, 2004 Report Share Posted April 13, 2004 Wow, that was so much more information than I expected to receive, and all of it was very helpful. It's most likely that I am going to be applying for a Nova Scotia student loan and not an OSAP one, but I think they work the same way. I'm going to look into this! Kirsteen, if the max. yearly RRSP contribution is currently ~ $13,000, that means that I won't be able to 'hide' any amount of securities over $13000 from the student loans people, correct? Also, is max. yearly contribution income-based, so therefore the lower your income is (as might be the case for someone who has been working a lowly research assistant job :rolleyes ), the lower your max. RRSP contribution is? Link to comment Share on other sites More sharing options...
Guest Elaine I Posted April 14, 2004 Report Share Posted April 14, 2004 I just received my Notice of Assessment today. RRSP limits are 18% of your previous year's earned income (ie: 2004 limit based on 2003 income) up to a maximum of $15,500, minus any pension adjustments that may have been made by your employer. In other words, you have to have made money in order to purchase RRSPs. Kirsteen, do you mind me asking how much you have to pay back to your RRSPs per year? Is the pay-back amount based on a percentage of the amount you borrowed, or a set amount per year? Also, do you have to start paying it back right away, or only after you are done school? Thanks for the info, Elaine Link to comment Share on other sites More sharing options...
Guest Kirsteen Posted April 14, 2004 Report Share Posted April 14, 2004 Hi there, Kirsteen, if the max. yearly RRSP contribution is currently ~ $13,000, that means that I won't be able to 'hide' any amount of securities over $13000 from the student loans people, correct? Also, is max. yearly contribution income-based, so therefore the lower your income is (as might be the case for someone who has been working a lowly research assistant job ), the lower your max. RRSP contribution is? You can contribute a certain amount over your yearly limit (about $2500 or so) without being penalized, but yes, essentially any amount that you contribute may still be taxed. Yes, your maximum yearly contribution is scaled according to your income for the year prior. Thus, if your income for the year prior is low, then your maximum RRSP contribution shall be low. However, if you have any carry-forwards, i.e., RRSP contributions that you could have made in previous years, but didn't, then you technically could contribute more than your maximum without penalty. Cheers, Kirsteen Link to comment Share on other sites More sharing options...
Guest Kirsteen Posted April 14, 2004 Report Share Posted April 14, 2004 Hi there Elaine I, Kirsteen, do you mind me asking how much you have to pay back to your RRSPs per year? Is the pay-back amount based on a percentage of the amount you borrowed, or a set amount per year? Also, do you have to start paying it back right away, or only after you are done school? The payback amount is based on the amount you borrowed and yes, you can start to pay it back right away. If you don't repay it right away the penalty then the government will simply include the amount as part of your yearly income and will tax you on it accordingly. It's not like defaulting on a loan which has all sorts of credit rating repercussions, etc. Here, the repercussions are in terms of you short-term tax hit and long-term RRSP loss. Cheers, Kirsteen Link to comment Share on other sites More sharing options...
Guest tweep0 Posted April 14, 2004 Report Share Posted April 14, 2004 Thats Kirsteen for that great explanation. Here's where i'm getting confused. If, according to aneliz, i have to get rid of my investments to receive OSAP, would putting them under an RRSP work? Also, I can easily sell my stocks and get my father to buy them again (it may even be profitable if I buy and sell wisely). However, selling these stocks will bring in a large sum of money ($0 profit). I can send this money to my fathers bank account to be used to re-buy the stocks. If all this is done BEFORE the May deadline, will OSAP care that i received this money / sold securities (they may see it as capital gains when in reality it was 0 profit)? Will it reduce my OSAP money? I do know that I will have to report the buying/selling on my tax return for next year, which doesn't bother me right now. To make the situation even more complicated, my dad doesn't trade stocks. He lent me some money to invest with my own money. Therefore, half of the value of my stocks isn't even my money. However, OSAP / Revenue Canada will think it's mine. I thought Nortel would bring me riches. Instead, its draining my finances and screwup up my OSAP too. :\ Tweep Link to comment Share on other sites More sharing options...
Guest aneliz Posted April 14, 2004 Report Share Posted April 14, 2004 Having an RRSP will not help you with OSAP....because as Kirsteen points out, you can 'borrow' from your RRSP to pay for education and then pay it back within a certain amount of time. OSAP will expect you to have 'borrowed' everything from your RRSP...before they will give you additional money. If you get rid of assets before May 1st, you may be better off...but OSAP has access to your tax returns (because you have to authorize this or you get NO money....) so they will eventually find out. What they will do about it, I don't know. Basically, OSAP expects you to be 'resourceless'...no car, no savings, no investments, no RRSP's, no spouse with an income, no parents (if you are less than 5 years out of high school) before you have enough 'financial need' to be eligible for OSAP. They will not give you loans to cover tuition so that you can keep your investments/RRSP's intact during the period that you are a student...you are expected to deplete all of these investments and resources first. Link to comment Share on other sites More sharing options...
Guest Kirsteen Posted April 14, 2004 Report Share Posted April 14, 2004 Hi there aneliz, They will not give you loans to cover tuition so that you can keep your investments/RRSP's intact during the period that you are a student...you are expected to deplete all of these investments and resources first. Are you sure about this? The reason I'm questioning this is because I've received a huge sum in OSAP loans over the past two years while in my MSc program, and the OSAP folks have known fully about my sizeable RRSP. The only other factor that I can think of that's marring the logic here is that I've already exhausted my Lifelong Learning Plan limit of $20,000, so perhaps they already know that they can no longer hit me to purge part of my RRSP. If that is, in fact, the case, then I guess we're both right. Cheers, Kirsteen Link to comment Share on other sites More sharing options...
Guest aneliz Posted April 14, 2004 Report Share Posted April 14, 2004 I don't know all of the details...given that I have no RRSP...but I do know of several classmates that received very little (or nothing) from OSAP/UWO bursaries and the reason given was 'take it out of your RRSP/investments'.... If there is a limit to how much you can take out of the RRSP and you have already reached that (and still have RRSP left!)...I guess we might both be right.... but I do know that OSAP won't provide full funding to someone with extensive investments that could be converted to cash... the goal of OSAP is to provide assistance to students without the resources to go to school...not to enable students to preserve their investment portfolio while going to school. Link to comment Share on other sites More sharing options...
Guest DonaldKaufman Posted April 14, 2004 Report Share Posted April 14, 2004 Well, that sinks my battleship. Because my yearly income is ridiculously low and a lot of my past income was accumulated outside of the country, and I might have to deplete my RRSP if I were to contribute to it anyway, means that this isn't sounding to promising for me. I had wanted to use the investment money for a downpayment on a house someday, but money is money, and I guess it doesn't really make a big difference whether you have assets and a big loan/LOC or no assets and a smaller loan/LOC. It will work out. Does anybody know when you can start to use that MD Management firm? I feel like I'd like to meet with someone from there before I have to make decisions about paying my tuition. I'm guessing they have extensive experience in dealing with doctors and students, but I'm doubtful that they'll deal with someone who just has an acceptance letter and a ton of questions. Is there any advantage in getting advice from those folks versus financial advisors at a bank? Link to comment Share on other sites More sharing options...
Guest tweep0 Posted April 14, 2004 Report Share Posted April 14, 2004 I talked to the UofT OSAP counselor and here's what he told me: For every year a student is out of high school, you are allowed to contribute $2000 to a regular RRSP (not LLP RRSP) with no deductions in OSAP. So if I (third year Uni student) were to transfer my funds to an RRSP, $6000 will be sheltered from OSAP reductions. The rest, according to the counselor, can reduce my OSAP - i.e. a stock portfolio valued at $10000 for a student out of high school for three years will result in a $4000 loss in OSAP funding. So i guess that RRSPs may be a tax shelter for income tax purposes, but OSAP still screws you. So, my options now become, selling shares off until the value is $6000 and then transferring to an RRSP. Or, just selling all and buying back through my dad. I like the latter because I'm probably going to end up cashing in all my stocks to fund med school (hopefully) anyway . Tweep Link to comment Share on other sites More sharing options...
Guest DonaldKaufman Posted April 14, 2004 Report Share Posted April 14, 2004 Tweep0, I think I'm going to end up doing the same thing. I figure I'll have used all of my investments by the end of first year, and then getting a student loan shouldn't be too big of a problem as a student with nothing in the bank, no job, and practically no car. Just remember, when you sell those stocks, they will count as income for you in 2004, so you'll get dinged next April unless you set some $$ aside. And also remember that I know practically nothing about finances, but I think that it happened to my dad one year. Link to comment Share on other sites More sharing options...
Guest tweep0 Posted April 14, 2004 Report Share Posted April 14, 2004 Actually, if I sell my stocks at current market value, I will have recorded a net loss (very little but a loss nonetheless)! So next april, I can claim capital losses and canl get tax credits (again very little), instead of paying taxes. But I guess i can kiss the investment game goodbye for the next 4 years. Tweep Link to comment Share on other sites More sharing options...
Guest DonaldKaufman Posted April 15, 2004 Report Share Posted April 15, 2004 4 years?? Do you plan on doing lots of investing during your residency? Link to comment Share on other sites More sharing options...
Guest Kirsteen Posted April 15, 2004 Report Share Posted April 15, 2004 Hi there tweep0, Actually, if I sell my stocks at current market value, I will have recorded a net loss (very little but a loss nonetheless)! So next april, I can claim capital losses and canl get tax credits (again very little), instead of paying taxes. Careful; unless things have changed, you can usually only offset capital losses against capital gains. Thus, you won't receive any tax relief unless you've also cashed in some securities this year for a profit. Cheers, Kirsteen Link to comment Share on other sites More sharing options...
Guest tweep0 Posted April 16, 2004 Report Share Posted April 16, 2004 Oh man! I didn't know that! I hope I can carry those capital loss tax credits to another year when I do (hopefully) make a profit. :b Tweep Link to comment Share on other sites More sharing options...
Guest gobluebaby Posted April 16, 2004 Report Share Posted April 16, 2004 Does anyone know if it would be better to list a common law relationship vs. single with parents household income of 130K ?? Also can an OGS scholarship be used towards med school ?? Thanks Link to comment Share on other sites More sharing options...
Guest aneliz Posted April 16, 2004 Report Share Posted April 16, 2004 You only need to list your parent's income if you have been out of high school for less than 5 years.... However, if you have been out less than 5 years, you HAVE to list your parent's income....and one that is $130 000 may be damaging... my sister's boyfriend got no OSAP with a family income of less than half that! If you are currently in a common-law relationship, than you also need to list that on your application....(but you will also need to list your partner's income on the form too.... and that income will be factored into your OSAP calculations too) Link to comment Share on other sites More sharing options...
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