This year’s tax deadline is March 1, 2019. Here’s how you can use last-minute RRSP contributions to offset 2018 income tax:
First, let’s look at what an RRSP is:
An RRSP is a Registered Retirement Savings Plan. It’s an investment account that allows you to save for your retirement on a tax-deferred basis.
Who’s eligible to contribute?
Any person, including non-residents of Canada, with earned income that is subject to Canadian taxation, can contribute to an RRSP.
DID YOU KNOW: You can make all or part of your contributions in your spouse’s or common-law partner’s name? As the contributor, you are still entitled to the tax deduction, but putting contributions in your spouse’s name enables you to split your income and reduce tax implications when receiving the income.
What impact do RRSPs have on my income tax?
Contributions made to an RRSP are tax deductible (up to an annual limit), which reduces your taxable income. This means you can claim contributions as a tax deduction when you file your income tax return which lowers the amount of tax you pay. To find out what your contribution limit for 2018 is, consult your tax documents from the previous tax year – specifically, your Notice of Assessment, your accountant, or log into your Canada Revenue Agency (CRA) account online. Don’t have one? Sign up today! It’s fast and easy.
What’s the best way to make contributions to an RRSP?
There are two options:
- Contribute with each paycheque. As little as $25 bi-weekly can earn you $650 annually towards your retirement PLUS reduce the amount of tax you would pay now.
- Contribute a lump-sum via cash, cheque or transfer. Talk to your advisor about the best way to move money into your RRSP account.
If remembering to contribute money to your RRSP is a challenge, you can set up a Pre-authorized Transfer (PAT) to do the work for you! You can set automatic transfers from your chequing account directly to your RRSP account without any post-it note reminders or to-do list entries. It’s easy!
So why not pay yourself to retire AND reduce your taxable income this April? Contribute to a Crosstown Civic Credit Union RRSP account today! Visit your local branch and speak to an advisor to find the best product for you.