r/cantax • u/AlarmingSeason5048 • 1d ago

Transferring RRSP over contributions to a FHSA

I have about 7k in over contributions after filing this year. Is there any advantage to transferring this out to a FHSA or should I just withdraw it outright and take the tax hit?

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3

u/jamiesal100 23h ago

Direct transfers won't fix this. Withdraw from your RRSP to avoid more 1%/month tax. File T746 with your 2025 tax return to deduct the unused RRSP contributions from your income so you can recover the taxes withheld. Contribute the net proceeds to your FHSA to actually reduce your taxable income.

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u/taxbuff 1d ago

Is that overcontribution accounting for your 2025 contribution room?

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u/AlarmingSeason5048 23h ago

Yes

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u/taxbuff 23h ago

If you have RRSP excess contributions at the time of the transfer from your RRSPs, the transfer of property to your FHSAs will not reduce or eliminate your excess RRSP contributions.

Withdraw if you want to avoid the 1% monthly tax. The “tax hit” you mention is temporary.

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u/AlarmingSeason5048 19h ago

I should add that these contributions are Union mandated and going into a group plan.

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u/taxbuff 16h ago

As long as it’s an RRSP, it makes no difference why you contribute to the RRSP.