RRSP and Tax Tips

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RRSP and Tax Tips

RRSP and Tax Tips :

If you are carrying high-interest debt you should consider reducing your debt instead of contributing to your RRSP. If you earned and paid Canadian taxes on your income in the 2020 tax year, you can contribute to an RRSP and may benefit from income tax savings. Your RRSP deduction limit can be found on your 2019 Notice of Assessment. And the RRSP contribution deadline for 2021 is March 1. Spousal RRSPs can help shift future income from a higher income spouse to a lower income spouse, which could result in tax savings. Build your savings faster by making contributions early in the year to take advantage of compounding income.

If you are carrying high-interest debt you should consider reducing your debt instead of contributing to your RRSP.

You may be able to split your eligible pension income with your spouse to reduce your overall taxable income.

You may be able to split your eligible pension income with your spouse to reduce your overall taxable income.

You may be able to split your eligible pension income with your spouse to reduce your overall taxable income. You can withdraw from your RRSP before retirement however, withdrawals will be added to your taxable income and you will lose that contribution room, with two exceptions: Lifelong Learning Plan (LLP) or, Home Buyers Plan (HBP) to purchase your principal residence. Tax on transferring your RRSP funds to your beneficiary may be deferred if the individual is your spouse or common-law partner; financially dependent children or grandchildren of any age. You can contribute until December 31 of the year you turn 71; assuming you have sufficient RRSP contribution room.

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TFSA and Tax Tips

Income earned within your TFSA account and money that is drawn from your TFSA account won't be taxed. This includes your original contribution amount, as well as any interest, dividends, and capital gains. This year total Contribution Room is $6,000/year and total limit is $69,500 for 2020 and $75,500 for 2021. If you can’t maximize your TFSA, what you don’t contribute gets carried over indefinitely. Do not over contribute otherwise, you will be penalized 1% a month on the excess amount. Your TFSA is NOT just a high-interest savings account. You can use it to hold investments like Mutual Funds Guaranteed Investment Certificate (GICs) or Bonds.

TFSA and Tax Tips

Don’t hold investments that generate income subject to foreign tax in your TFSA. The foreign taxes paid on your income aren’t recoverable in a TFSA. It might be better to hold such investments in your RRSP, which may get a tax treaty exemption from foreign tax. You can withdraw money when you want tax free so the TFSA could be great for saving goals like, down payment, dream car, education, emergency, retirement. You don't have to pay back what you've withdrawn from your TFSA. If you do plan re-contributing withdrawn amounts back into your TFSA, you can only do so in the following calendar year.

Don’t hold investments that generate income subject to foreign tax in your TFSA. The foreign taxes paid on your income aren’t recoverable in a TFSA.