How to Reduce Your Income Tax by Using Your RRSP’s

Reduce Your Income Tax with RRSPsThe 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:

  1. 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.
  1. 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.
  1. 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.
  1. 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.
  1. 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.


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