RRSP (REGISTERED RETIREMENT SAVINGS PLAN
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What is an RRSP?
A registered retirement savings plan allows you save for retirement but it can also be used to finance the purchase of a first property (HBP) or to go back to school (LLP). An RRSP offers a double tax advantage. First, the money invested is tax deductible. You can therefore deduct your contributions from your annual income and pay less in taxes. Second, as long as you don’t make any withdrawals, the money saved in your RRSP is non-taxable.
How much can I contribute to my RRSP?
For 2024, you can contribute up to 18 % of your annual income up to a maximum of $31,560. Your unused contribution room can be carried over year to year, which means that you can invest more than 18% of your annual income if you have not maximized your contributions in previous years.
How can you maximize your RRSP contributions?
Because RRSPs have many tax advantages, an RRSP loan may be a good strategy for maximizing your contributions.
What is the RRSP contribution deadline?
For the 2024 tax year, you have until March 3, 2025, to contribute and enjoy tax deductions. You can still contribute to your RRSP after this date; however, your contributions will be entered on your income tax return for the next year.
Key advantages of an RRSP
- Contributions made to an RRSP lower your taxable annual income, which means that you enjoy tax savings.
- As long as you don’t make withdrawals, you do not pay taxes on the money earned in your RRSP.
- Unused contribution room is carried over to the following year, which means that you can contribute more than your annual limit.
- You can use funds from your RRSP to buy a first property (HBP) or go back to school (LLP).
- You can contribute to your spouse’s RRSP to lower your taxable income and enjoy tax savings.
