RRSP Contribution Deadline March 1, 2013 and How your Contribution Affects your Tax Return

Wanting to save some money on taxes this year while building up your retirement savings? An RRSP is one of the best ways to achieve this. To save on this years tax return you must contribute to your RRSP before March 1, 2013.

So how does it work? Let me break it down and show you just how much money you could be saving. For my example I am going to assume an annual income of $50,000 and a $2,500 RRSP Contribution. Please keep in mind that this is only an example and your tax situation may be different.

Without RRSP Contribution:
Income: $50,000
Taxable Income: $50,000
Taxes Payable: $8,686

With an RRSP Contribution
Income: $50,000
Less RRSP Contribution: $2,500
Taxable Income: $47,500
Taxes Payable: $7,943

Without the RRSP contribution you would owe the government $8,686. This is typically taken off of your income from your employer every pay cheque. In our example this means that come tax season the Government doesn’t owe you anything, and you don’t owe the Government anything.

With the RRSP contribution you would owe the government only $7,943. Since you have had $8,686 taken off of your income throughout the year, this means that come tax season the Government owes you the difference between your taxes paid ($8,686) and your taxes payable ($7,943). How does this affect your tax return? The Government owes you $743 on your tax return. Not only do you have an extra $2,500 in your savings, you also have an extra $743 in your pocket.

If you would like to know how an RRSP contribution can help you, please contact Greg or Mike at 1-250-753-7888.