The RRSP deadline is March 3, 2014 this year. Each year there seems to be questions; how can we reduce the amount that we owe to Revenue Canada, how can I use my RRSP’s as a down payment for my first home purchase? I hope this helps you a bit:
- Contribute to your spouse’s RRSP and benefit from income-splitting at retirement. The tax paid by a couple is often reduced when retirement income is evenly split, rather than being claimed by one spouse who would incur a higher tax rate.
- Invest now but claim the RRSP deduction when you need it. RRSP deduction amounts can be accumulated and taken in future years. If you’re currently in a low tax bracket, make your investments but postpone claiming your deduction until you’re in a higher tax bracket.
- Don’t wait until the deadline. The sooner you contribute, the longer your investment earns tax-deferred income. Early contributions may also allow you to have your source tax deductions reduced.
- Turn your contribution into a down payment for a home. You can borrow up to $25,000 from your RRSP to buy your first home. If you already have $25,000 and enough unused RRSP contribution room, make your contribution and receive your tax refund. Then borrow the $25,000 back from your RRSP and add your refund money to create a substantial down payment! If you are purchasing as a couple then you have $50,000.
- Consider an RRSP mortgage. In certain circumstances, you can hold your own mortgage inside your RRSP. This means the mortgage interest you pay goes to your RRSP instead of a bank, which means your rate of return will be higher than with a GIC. To see whether this strategy is right for you, contact me today to review your options.
Blogged by Elise Hildebrandt, AMP, Mortgage Associate, Broker Lic# 316103 at The Mortgage Centre, Brokerage Lic #315847, Saskatoon. She has been in the financial industry for 16 years. Please contact her today if you have any questions about your mortgage at www.elisehildebrandt.ca.