Under a RRIF, are withdrawals taxed, and how is this treated for the year they are taken?

Under a RRIF, are withdrawals taxed, and how is this treated for the year they are taken?

• A. Withdrawals from a RRIF are fully tax-free.
• B. There is a fixed rate of tax on RRIF withdrawals regardless of income.
• C. Withdrawals from a RRIF are taxed as ordinary income in the year they are withdrawn.
• D. RRIF withdrawals are allowed only after age 90.

Answer: (C)

Withdrawals from a RRIF are taxed as ordinary income in the year you take them. The amount you withdraw in a given year is added to your other income for that year and taxed at your marginal tax rate. The financial institution typically withholds tax at the time of withdrawal as a prepayment, but your final tax payable is determined when you file your return. The RRIF also has a minimum withdrawal requirement each year based on age, but you can take more than the minimum if you wish—the tax treatment remains the same for the year of withdrawal. Inside the RRIF, investment earnings grow tax-deferred until they are withdrawn.

Withdrawals from a RRIF are taxed as ordinary income in the year you take them. The amount you withdraw in a given year is added to your other income for that year and taxed at your marginal tax rate. The financial institution typically withholds tax at the time of withdrawal as a prepayment, but your final tax payable is determined when you file your return. The RRIF also has a minimum withdrawal requirement each year based on age, but you can take more than the minimum if you wish—the tax treatment remains the same for the year of withdrawal. Inside the RRIF, investment earnings grow tax-deferred until they are withdrawn.