When a Spousal RRSP Backfires
A spousal RRSP lets one spouse use their RRSP room and claim the deduction, while the other spouse owns the account and normally pays the tax when money comes out. This can help when one partner earns more than the other, but the timing of the withdrawal matters.
CRA looks at three calendar years: the year of the withdrawal and the two years before it. If the contributing spouse added money to any spousal RRSP during that window, some or all of the withdrawal can go back onto the contributor's tax return. The account may be in the other spouse's name, but recent contributions still follow the person who made them.
Say one spouse contributed $5,000 in each of 2021, 2022 and 2023, and the other withdrew $18,000 in 2023. Up to $15,000 would be taxed to the contributor. The remaining $3,000 would be taxed to the spouse who owns the account.
The calendar matters more than the number of months you have waited. If the last contribution was made in December 2023, a withdrawal in January 2026 sits outside the contribution year and the next two calendar years. That is only 25 months later, even though people often call this the three-year rule. Before taking money out, check the year of the last contribution instead of counting 36 months.
Once the person receiving eligible RRIF income is 65 or older, there is another route. They can generally elect to split up to 50% of that income with their spouse, regardless of their spouse's age, which can reduce the need for a spousal RRSP later, though the tax result depends on both returns.
If you and your spouse have a spousal RRSP going, do you know which calendar year the last contribution went in?
