VANCOUVER, BC--(Marketwired - February 14, 2017) - There's less than a month left to contribute to your RRSP for the 2016 tax year! March 1, 2017 is the last day contributions can be made. Before you make your contributions, here are three tips from the Chartered Professional Accountants of British Columbia (CPABC) to help you maximize the benefits of your RRSP:
- Tax Savings from an RRSP
If you have an RRSP deduction limit as shown on your 2015 Notice of Assessment and you are a B.C. resident, the following are the income tax savings you could realize from making an RRSP contribution:
|If your taxable income is…
|| ||$11,474 - $45,282
|| ||$45,283 - $90,563
|| ||$90,564 - $140,388
|A $1,000 RRSP contribution would reduce your 2016 taxes by…
|| ||Up to $227
|| ||~$227 to $328
|| ||~$328 to $407
|| ||~$407 to $477
- RRSP as a Tax Deferral Vehicle
Remember, an RRSP is a tax deferral vehicle -- you will be taxed on the funds when withdrawn. That said, would you rather pay $1 of income tax tomorrow or $1 of income tax today? Actual tax savings should result, as you likely will be in a lower tax bracket when you withdraw your funds at retirement.
- Spousal RRSP
A spousal RRSP is an RRSP in which one spouse is the contributor and the other spouse receives funds from the RRSP. Spousal RRSPs can help shift future income from a higher income spouse to a lower income spouse. This can provide some tax savings when the receiving spouse withdraws funds from his or her RRSP, RRIF, or annuity. It might also reduce the clawback of Old Age Security from the higher income spouse and allow the lower income spouse to claim the pension income tax credit.
Spousal RRSPs provides immediate tax savings, since the person making the contribution gets the tax deduction while the spouse, rather than the contributor, is taxed on any withdrawals at a future date.
Learn how to maximize your RRSP benefits with CPABC's RRSP and Tax Tips at www.rrspandtaxtips.com.
NOTE TO JOURNALISTS: Local CPAs are available for interview. An RRSP infographic is also available.
Please credit Chartered Professional Accountants of British Columbia (CPABC) for use of the content and include the following disclaimer: Tax rules relating to these RRSP tips are complex. This is not intended as tax advice and you should not make tax decisions based solely on the information presented in these tips. You should seek the advice of a chartered professional accountant before implementing a tax plan or taking a tax filing position.
About CPA British Columbia
The Chartered Professional Accountants of British Columbia (CPABC) is the training, governing, and regulatory body for almost 35,000 CPA members and 5,500 CPA students and candidates. CPABC carries out its primary mission to protect the public by enforcing the highest professional and ethical standards and contributing to the advancement of public policy. CPAs are recognized internationally for bringing superior financial expertise, strategic thinking, business insight, and leadership to organizations.
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