RRSP Tip: Carry Forward Your RRSP Tax Deduction

Written by FrugalTrader on Feb 19, 2009 filed under Tax Minimization

With the RRSP deadline right around the corner (March 2, 2009), this is a strategy that I’ve mentioned in passing a couple times, but never in great detail. That is, providing that the situation is right, you should consider carrying forward all or a portion of your RRSP tax deduction to a future year to maximize your tax return.

Who should do this?

I can see this strategy being useful in two situations:

Higher Income in the Future. Recent university graduates are a prime example. New job, lower starting salaries, but some built up RRSP contribution room over the past few years. With higher future earning potential, thus higher tax rates in the coming years, it may make sense to carry forward the RRSP tax deduction to be claimed during years of higher income (thus higher taxes). This will allow the new grad to start building their investment portfolio to take advantage of the time value of compounding growth and obtain a larger tax deduction in the years of higher earnings.
Claim just enough to drop to the next bracket below. As you may know, RRSP contributions result in a tax deduction which means that they reduce your income (and taxes owed) for the year. However, since the Canadian tax system is progressive (the more you earn, the higher your tax rate), it may make sense to contribute just enough to lower your income to the next tax level below. That way, your current RRSP contributions can be used for the higher tax bracket next year. This works especially well if you expect to make more money in future years.

How Much Will I Save?

Say for example that Andrew, from NL, makes $42,885 / year with a $10k contribution for 2008. Looking up his marginal tax rate, the amount earned above $37,885 will face 35.3% tax. Amounts from $37,885 to $30,215 will face 28.3% tax.

If Andrew were to claim the whole RRSP contribution this year, it would result in a tax return of ($5,000×35.3%) + ($5,000×28.3%) = $3,130. However, if he were to carry forward $5,000, then he would get an extra $350 back on his contribution (or 7% more) on his $5,000.

The caveat being that you need to account for the time value of money before using this strategy. Basically, the tax savings from waiting a year should beat any potential gains you would have made by investing/saving the money. Another thing to note is that sometimes the spread between tax brackets is small which makes this strategy not as effective.

Final Thoughts

Although carrying forward your RRSP tax deduction may not be for everyone, it works great for those who have a large RRSP contribution and would end up dropping down a significant tax bracket if the total contribution was claim in that year. It also works well in reverse. That is, if you expect to jump tax brackets due to increased income in future years.

As I mentioned above, if you only end up saving a couple percentage points, then it may not be worth your while to carry your tax deduction forward. You’ll have to decide for yourself whether or not your situation warrants carrying forward the RRSP tax deduction.

Do you use a similar strategy? Or do you simply claim your whole RRSP contribution every year?

As always, this post is for informational purposes only. Please consult a financial and/or tax professional before implementing any strategies mentioned on this blog.

47 Comments, Comment or Ping

1. Englishman in canada

FT can i clarify something, when you carry forward the tax deduction, I assume that it is calculated at your maximum Tax margin.

using your example above.

($5,000×35.3%[2008 cont])+($5,000×35.3%[2009 cont])= $3530

It would not drop the 2009 contribution into the next tax bracket?

Feb 19th, 2009 @ 8:49 am
2. Mark

I purchased my home using RRSP’s under the home buyer’s plan a couple years ago. I’ll claim only enough RRSP’s to make sure I break even at tax time; everything above that will be claimed as repayment of the amount I took out under the home buyer’s plan.

Feb 19th, 2009 @ 8:51 am
3. Braiden Harvey

Thanks for the great tips.

Braiden Harvey

Feb 19th, 2009 @ 9:01 am
4. FrugalTrader

Englishman: AFAIK, any carried forward amounts count as regular contributions the next year. That is, they are tax deductions that reduce income for that year thus calculated at the corresponding tax rate.

So if in the next year you jump to the 45% tax bracket, you will get 45% of the RRSP contribution back providing that you don’t jump down tax brackets.

Feb 19th, 2009 @ 10:29 am
5. Charles in Vancouver

Okay, so the strategy outlined is to contribute $(X+Y) to RRSP, claim $X in 2008, $Y in 2009.

Or, you could choose to contribute $X to RRSP because you want only that much of a deduction, and $Y to TFSA. Assuming that your $Y grows in the TFSA, you can transfer it in December ‘09 (in-kind) from TFSA to RRSP and get a tax deduction greater than $Y in 2009. Plus you get the TFSA room back in January ‘10.

Feb 19th, 2009 @ 11:20 am
6. canucktuary

Great post! This is exactly the situation I’m in (just finished school last year). I want to max out my HBP (by June 2010), but will not claim anything that puts me below the $37,885 limit because I only worked half a year and next year I’ll likely jump two tax brackets.

Thanks for verifying this strategy and its potential pitfalls FT.

Feb 19th, 2009 @ 11:22 am
7. nobleea

I’ve never been too clear on this. I assume that you can still only contribute to your maximum contribution limit for the year?

And I’m curious about this:
“If Andrew were to claim the whole RRSP contribution this year, it would result in a tax return of ($5,000×35.3%) + ($5,000×28.3%) = $3,130. However, if he were to carry forward $5,000, then he would get an extra $350 back on his contribution (or 7% more) on his $5,000.”

What if Andrew contributed 10K every year? It would just keep on piling up.

And this:
“The caveat being that you need to account for the time value of money before using this strategy. Basically, the tax savings from waiting a year should beat any potential gains you would have made by investing/saving the money. Another thing to note is that sometimes the spread between tax brackets is small which makes this strategy not as effective.”

I guess I don’t understand it. I thought that once you contribute the money to your rrsp, you can invest it however you want. Regardless if the contribution is claimed or not.

Feb 19th, 2009 @ 11:59 am
8. FrugalTrader

Nobleea: I apologize, my wording wasn’t very clear in the post. I’m no tax expert (one should be consulted), but my understanding is that you can carry forward your tax deduction from your RRSP contributions. Therefore, even if you were to make $10k contributions every year, it would indeed “pile up” if you were to carry forward the deduction every year.

So yes, once you contribute your money, you can invest it. However, you have the choice on what to do with your tax deduction.

Does that clear things up?

Feb 19th, 2009 @ 12:07 pm
9. CanadianFinance

Good post. I think the “higher income in the future” strategy makes the most sense. Say you made the $42,885 in the example and always contributed just enough to drop you into the next tax bracket.

Now if you know that you’ll get a minimum 3% raise in the new year, and you have the extra $1286 available now, you might as well make the contibution and claim it next year. That gives you an extra year of tax-free growth, not to mention that this year it could be the difference of getting in on the lower stock prices or missing the boat whenever they finally rebound a bit.

The second strategy, “Claim just enough to drop to the next bracket below”, I would only use if I accidentally overcontributed beyound the tax bracket line.

Feb 19th, 2009 @ 12:30 pm
10. J

Job stability also factors into this.

The company is holding off on merit increases and have dropped the bonuses for 2009, so I will be making less this year than I did in 2008.

Further more, I figure that I have a 10-20% chance of not having my current job next year. Being unemployed for some months or facing a pay-cut going to a new employer, would also lower my tax bracket for 2009. For me it makes sense to max out my RRSP and start the tax deferred growth now (while I still have money to contribute). Of course, if you don’t have at least somewhat of an emergency fund in place, that might be a higher priority.

Feb 19th, 2009 @ 12:35 pm
11. Four Pillars

Nobleea – I believe the ‘time value of money’ comment applies to the tax refund only.

Feb 19th, 2009 @ 12:47 pm
12. undecided

Thanks for posting this, I’ve been thinking about this for awhile as I’ve been fortunate enough to make a good income last year and hope to make a very significant increase this year. I’m still somewhat undecided on the issue, however this article did give me more to think about.

For purposes of discussion, let’s consider a 70k income in 2008 with a 10k RRSP contribution. To use your Newfoundland example, the corresponding tax rates are:

2008
over $37,885 up to $60,429 35.30%
over $60,429 up to $75,769 38.00%

which means a tax return on a 1k RRSP of:
= 9571 * 0.38 + 429 *0.353
= 3636.98 + 151.44 = $3788.42

Now, for 2009 consider an increased income to above 100k, the tax rates are:

over $81,452 up to $126,264 – 41.50%
over $62,121 up to $81,452 – 37.50%
over $40,726 up to $62,121 – 34.80%

The same 10k rrsp in 2009 will yield a tax return of:
= 10,000 * 0.415 = $4,150.00

Therefore by carrying over the RRSP to 2009, you get an extra 4150-3788.42 = $361.58.

Seems like a nice increase, but as you said, you must consider the time value of money. Taking the deduction in 2008, you get $3788.42 now, which can be used to invest or to pay down a mortgage (which has a more certain return value than investments). At a mortgage rate of 5.12% (5.19% effective annual rate based on semi-annual compounding), the value of the 2008 RRSP deduction is now:

= 3788.42 * 1.0519 = $3985.04

So now the value of carrying over to 2009 has diminished to 4150-3985.04 = $164.96. I’m not sure whether getting another $165 (not quite 2% extra) justifies waiting another year to claim it, plus betting that your income won’t be lower than anticipated in 2009.

I think you’d have to be VERY certain about your income for the coming year to bet on this. Of course contributing more to your RRSP in 2008 will increase the gap, but you also must consider any new contributions in 2009 – you don’t want the combined contributions to push you back into a lower tax bracket for your deductions.

In the end I think I am going to definitely do #2, claim enough in 2008 to use up my top-level marginal tax rate, then I may carry over the remainder to 2009 or just claim it now, I’m not sure. I will have to re-calculate when I have confirmed my income and RRSP contributions for last year.

Feb 19th, 2009 @ 12:59 pm
13. Ray

Thanks MDJ for the tip. this is pretty much the strategy I have used previously but now with the TFSA coming out, I just contribute to that and and transfer it to rrsp when increase my taxable income, similar to what Charles from Vancouver suggested. I think it would work pretty much the same way.

Feb 19th, 2009 @ 1:01 pm
14. Sampson

Andrew is obviously not caught up on his RRSP contributions ;)

Feb 19th, 2009 @ 1:36 pm
15. Tax Resource Blogger

This is a not very well known fact. You can make the contribution but there is no reason why you should take the deduction.

Another thought where it could apply is in a job loss: Someone lost their job and received severance or commuted value of a pension. The should contribute tot their RRSP to their contribution room and shelter as much money from tax as possible. However, deduct enough to reduce taxes to zero.

Feb 19th, 2009 @ 3:54 pm
16. Stan

Excellent points. This is where tax software is especially useful since it allows you to adjust the optimal amount. There are indeed a few instances where taking the whole RRSP deduction in a particular year is a bad idea. A case in point: while just starting out their teaching careers, my sister and her husband each invested $20,000 in their RRSP in order to utilize the Home Buyers Plan. They then used that credit fully right away, even though they earned maybe $30k each at most that year. Sure, they received a nice wad of an income tax return, but they effectively reduced their income to a very low marginal tax rate. They would have been far better off sitting on the deduction for a year, and using it now when they make $55k a year and are in a higher bracket. It’s worth some planning.

Feb 19th, 2009 @ 9:22 pm
17. Yamsicle

Question. For couples, is each individual taxed separately or is the income added together then taxed? If I make $60 grand and my spouse makes $90 grand, does CRA consider that our household made $150, and tax it accordingly? I have always been confused by this.

p.s Great blog. You do an excellent job of explaining complicated financial info in an easy to digest manner!

Feb 19th, 2009 @ 9:23 pm
18. FrugalTrader

Yamsicle: Thanks for the kind feedback. For couples, taxes are calculated separately. However, even though the incomes are calculated separately, there are some benefits of being a couple. Some of these include the ability to choose who claims the medical expenses, charitable expenses and dividends.

Feb 19th, 2009 @ 9:27 pm
19. Yamsicle

Thanks for the quick reply! I am still confused. . .last year when I did my taxes separately, my return was 3 grand. As soon as I included my spouse’s income (we used Quicktax), my return went to $100. No joke!

Feb 19th, 2009 @ 10:15 pm
20. DK

Yamsicle,

The likely explanation for that is because certain tax credits for low income earners are based on family net income, thus when you include your spouse’s income your family net income goes up and the software takes back the tax credits it originally gave you when it only had your income.

Feb 19th, 2009 @ 11:17 pm
21. Yamsicle

DK – Thank you for the suggestion. I ruled that out; last year I earned $50 grand, which is not a huge amount, but I didn’t think that would qualify me for low income tax credits. Especially since we have no children. I used the last of my education tax credits from uni in 2006, so maybe that had something to do with it? I thought it was because the two incomes were added together. Now I am really curious. I think I will have to ask an accountant about this one.

Feb 20th, 2009 @ 1:35 am
22. Joeq

Hi Guys,

I’m somewhat different and wanted some info to see if I’m thinking straight. I am fortunate to make 150K/yr and plan on doing so for the foreseeable future. Seeing as I’m at the highest tax bracket, would it be better to carry forward my RRSP contribution so I can drop it down to the below 126k bracket? Ie 2 years worth?

Also, I know this isn’t a TSFA thread, but would it not be better to max my TSFA if I’m at such a high bracket?

Thanks for all the info guys, I’ve read for a while but have finally decided to contribute!

Cheers

Joeq

Feb 20th, 2009 @ 1:40 am
23. Ray

Yamsicle- Try doing the taxes individually see if there is a difference, but definitely speak with an accountant about the issue, it seems a little weird to me.

Joeq: as for rrsp deduction you can use the ernst and young calculator to estimate your tax refund depending on your province

http://www.ey.com/GLOBAL/content.nsf/Canada/Tax_-_Calculators_-_2007_RRSP_Savings
I tried your numbers and didnt notice any difference in the payout, also the difference between the last two brackets is 2% you could use your refund and buy a government bond returning about 3% and you’d come out ahead.
About your TFSA well if you can max it out than go for it, but if it is rrsp vs tfsa i think contributing to your rrsp would be the better choice since you are in the highest tax bracket and would get a substantial tax refund.

Ray

Feb 20th, 2009 @ 5:29 am
24. Adrian

Just an observation for Mark regarding HBP and RRSP. As long as you haven’t maxed out your RRSP contributions, it is better to just keep up with minimum HBP repayments (for which you already got the tax refund) and instead claim (or carry forward) as much as you can from your annual contribution.

Feb 20th, 2009 @ 6:18 am
25. Mat

This is exactly the strategy I’m going to use this year. I finished school in May, and so only worked 8 months of the year (the first 4 months of which was at reduced pay as I was still an “intern”). So, unless I lose my job, I know with absolute certainty that my income in 2009 will be significantly higher (1 if not 2 tax brackets) than it was in 2008. As a result, I’m going to carry any RRSP deductions from this year forward into 2009.

Feb 20th, 2009 @ 9:48 am
26. Amanda

Yamsicle -

Is it possible that when you did your tax return “separately”, you indicated to QuickTax that you HAVE a spouse (without entering her income)? If so, QT would have given you the spousal amount in your deductions (i.e. the basic deduction for her). That would account for around $2k depending on your province. It also might have moved around some other deductions (medical expenses or charitable contributions) once you added her income, to maximize the total refund for both of you.

Feb 20th, 2009 @ 11:19 am
27. Sarafina

I personally think carrying forward your RRSP deduction is overrated. RRSP’s are not a finite source for the most part. Yes, there is a limit that everybody can contribute but suffice to say very few people ever do and most people will die with unused contribution room. Why not contribute now, get the deductions and contribute later and get the deductions? If the premise is that you are going to be getting higher income then you should have more money available to contribute anyway…

Also, for people mentioning RRSP’s and TFSA’s. It has been shown that contributing to an RRSP and investing the returns in a Non registered account produces a better return than simply contributing to RRSP’s or simply contributing to a non-registered account (assuming same rate of returns and tax brackets). This will be magnified with a TFSA so that is definitely the best way to go…

Feb 20th, 2009 @ 10:35 pm
28. Sampson

Sarafina,

It all depends on your tax bracket and marginal rates and your personal situation.

Even if you do not max out your contributions, you can still carry both contribution room and the tax deduction forward. As many above list as an example, students and those on the cusp of a new tax bracket benefit the most.

When I was in University (for a long, long long time – stupid grad school), I kept contributing to my RRSPs, did not max them out, but I didn’t claim the tax credits either. It simply didn’t make sense when I had huge tuition credits, and didn’t earn any income. But a few years out of school, I made good cash and because I carried my deductions forward, I essentially didn’t have to pay income tax for the first 2 years of my ‘working’ life.

Also, re: RRSP vs. TFSA. Again, this depends on your personal financial situation. If you are currently in the highest tax bracket now, and expect to be so when you retire, there really should be 0 difference if the input is equal – its just a matter of whether the tax man gets you now, or later. In the simulations I’ve looked at, RRSPs can be worse if you lose all your CPP and OAS benefits due to high income.

Again, there are fewer high income earners than low income earners in Canada, but it really depends on your personal situation and income levels.

Feb 21st, 2009 @ 12:34 pm
29. poor white trash

I didnt really see anyone mention the fact that if you use all your deduction immediatly then you get your return this year. even if it’s a little smaller then if you waited you still have the money in hand, and can invest it or recontribute it right back into rrsp’s. Im not sure but it seems to me you would come out ahead this way rather than leaving all your return money in the governments coffers an extra year or two

Feb 22nd, 2009 @ 11:53 pm
30. FrugalTrader

pwt: Are mentioned in the article, the strategy works best when there is a large spread between marginal tax rates. Otherwise, it’s probably best to stick to the strategy that you mentioned.

Feb 23rd, 2009 @ 9:20 am
31. Sandy

Do you know if there’s any software or formula out there that will tell me exactly how much I should deduct this year in order to just reach the next lower tax bracket? I’ve tried the ufile and H&R – and they both don’t seem to tell me how much I should deduct for the best benefit as mentioned here.

I tried to do it manually myself but I’m getting all confused about which income (line #) I should use, i.e., is it the income before or after the deductions, if after, then after which deductions, taxable/non-taxable?

Thanks for your help in advance. I live in AB.

Feb 24th, 2009 @ 4:23 pm
32. Ben

Sandy:
1. Start first with your total “gross” income from all sources. If your income is reported on a T4, this should be easy to find. Then subtract all of your deductions (RRSP, child care, etc), to calculate your “Net” income.
2. It is your “Net” income that actually gets taxed. This number can easily be found using tax software, or by hand with a little know-how.
3. Then get your hands on a copy of the tax table for AB, showing tax rates and tax brackets.
4. Compare your “Net” income to the tax brackets, and find the next tax bracket lower than your income. The difference between the two is the magic number you want. You can then either make a new RRSP contribution equal to this difference, or apply any carried-over amounts against that difference.

Using a software like Quicktax can quickly show you where you stand. After you enter all your incomes and deductions, it will tell you what your net taxable income is (have to go to Form view). Then do Step #4 above.

I’ve always thought that Quicktax should incorporate a marginal tax bracket planning tool in the software, ie. tell you how much to contribute to RRSP’s to get down to the next “step” in your tax rates. For example, if I were $100 over a tax bracket, it should calculate that putting $100 into RRSP will return me $40, but putting another $100 will only return me $30. Etc, etc. The RRSP optimizing tool included has been absolutely useless to me so far, as it really only skims the surface.

Feb 26th, 2009 @ 11:35 pm
33. Sandy

Ben:
Thank you! I will try it this evening. I wanted to make sure I’m doing this right as I made a big contribution this past year (my first one ever) and I’m finally making enough money to cross tax brackets – I do want to save some deduction room for next year.

Mar 4th, 2009 @ 4:12 pm
34. Remus

FrugalTrader can you please direct me to an “official” source stating that you can indeed carry forward the tax deduction?
I was at my accountant today and he told me you can not so I would like to present him the official thing.

thanks

Mar 5th, 2009 @ 4:40 pm
35. DK

Remus,

You should get a new accountant. Seriously.

Mar 5th, 2009 @ 5:21 pm
36. Remus

That may be the case :) however I would like to get an official link or something. I know MDJ knows his stuff but this is too important to simply follow blindly. Having an official version of it would be great.
Like somewhere on the Canada Revenue site. But I can’t find it.

Mar 6th, 2009 @ 2:38 pm
37. nobleea

Remus;

What you contribute to your rrsp and what you deduct for rrsp contributions on your tax form don’t have to be the same amount.

The part where your accountant might be talking about is that you can only contribute up to your contribution limit. Regardless of whether you deduct it or not.
For example, if you have a contribution limit of 10K, you can contribute 10K (well, 12K with the lifetime overcontribution). You can defer all of this contribution til a future year. Or you can deduct all of it against your taxes this year, or a mixture of both. If you only have 5K of contribution limit, you can’t contribute 10K, claim the 5K to your limit and defer the other 5K to another year.
Just google Defer RRSP Contribution

Mar 6th, 2009 @ 2:46 pm
38. aooa

I swore I posted a comment/question the other day but don’t see it here.. so here it is again..

My wife and I are only doing our 07 and 08 taxes – so looking at our RRSP contributions in 07, I was playing around with this carrying forward RRSP contribution to 08 Tax year.

My thought was that since my wife and I made more money in 08 that if we carry forward most of the 07 RRSP Contribution to 08 (just enough so we don’t owe anything in 07 tax), we would end up paying less tax in total (07 + 08 refund).

But after doing several versions of uFile with different carry forward 07 RRSP amounts, I’m finding that this is NOT necessarily true.

We get MORE total 07+08 refund if we actually use more 07 RRSP contribution in 07 tax year VS. carrying forward majority to 08 Tax year – difference is $409!

This does NOT make sense to me.. I’ve been racking my brain the last couple of days trying to figure out why this is… Can any one offer possible explanation??

Mar 7th, 2009 @ 9:46 am
39. aooa

Just wanted to add the following:

TOTAL $BASE REFUND is the total (07+08) refund if I use up all RRSP contribution in 07 and do not carry forward any amount to 08.

If I carry forward ALL 07 RRSP contribution to 08 Tax year, the total (07+08) refund is approx $300 LESS than TOTAL $BASE REFUND.

If I Carry forward just enough of our 07 RRSP contribution to 08 Tax year so we do not owe any taxes in 07, the total (07+08) refund is EXACTLY the same as if I carry forward all 07 RRSP contribution to 08 Tax which is approx $300 LESS than TOTAL $BASE REFUND.

If I carry forward only about 24% of my wifes and 50% of my 07 RRSP contribution to 08 Tax year, our total (07+08) refund is a little over $100 MORE than TOTAL $BASE REFUND.

aooa

Mar 7th, 2009 @ 12:47 pm
40. aooa

clicked submit to early..

So if I carried over most of our 07 RRSP to 08 thinking that we’ll pay less tax since we made more money in 08 then I would have lost out on over $400 in total 07+08 refund compared to the last scenario of carrying forward only 24%/50% to 08 tax year..

again this still doesn’t make sense but at least we got more refund!

Mar 7th, 2009 @ 12:55 pm
41. DK

probably using all your RRSP room in 07 when you made less money dropped your net income to the point where you qualified for some refundable tax credits thus maximizing your total return.

Mar 7th, 2009 @ 10:36 pm
42. aooa

Started to look at the actual returns more closely… what I’m finding is that by using up more 07 RRSP contribution for both my wife and myself, both our 07 Ontario Health Premium was lowered to the next bracket which is $150 less – so instantly that’s $300 in savings. While in 08, the difference in carry forward didn’t make a difference in our 08 Ontario Health Premium.

So for those looking at doing carrying forward RRSP contribution – take into account the Ontario Health Premiums you’ll end up paying as well!

Mar 8th, 2009 @ 4:59 am
43. Mechanonuke

Just a follow up to aooa’s post.
I took a look at the Ontario Health Premiums, specifically the $72,000 to 72,600 bracket premiums ($600/year -> $750/year).

If one had the contribution room and was somewhat above the $72,600 mark, there could be a definite savings.

http://www.rev.gov.on.ca/english/taxes/healthpremium/rates.html

Mar 8th, 2009 @ 10:28 pm
44. Sarah

Hi! Great tip. I use this strategy frequently (being self employed). One question..is there a time limit on how many years you can carry this forward? Thanks!

Mar 16th, 2009 @ 5:48 pm
45. Ed Rempel

Hi FT,

Good post. This is one of the 3 Ds of tax savings – deduct, defer, divide. We use this strategy a lot with our clients – not just with RRSP contributions, but with other deductions or credits. It is useful to know what tax bracket you are in and how far your income is from the next higher or lower tax bracket.

Ed

Mar 16th, 2009 @ 9:55 pm
46. Ed Rempel

Hi Remus,

If you want to prove this to your accountant, look at the bottom of your Notice of Assessment in the RRSP contibution room section. The very bottom number is the amount of RRSP contibutions not deducted and carried forward. If you accountant doubts this works, why does CRA have field to track the amount you carry forward?

Ed

Mar 16th, 2009 @ 9:57 pm
47. Ed Rempel

Hi aooa,

You have not mentioned your income amounts. Carrying forward your RRSP contributions will not save you money, unless it would bring you to a lower tax bracket this year.

Also, the optimum RRSP contribution is not the amount that means you don’t pay tax when you file your return. Many people look at whether they have to pay at tax time, but that is not the important issue.

The optimum RRSP contribution is the amount that will bring you to the bottom of you current tax bracket, but only if you can deduct it at a higher tax bracket in a future year.

Ed

Mar 16th, 2009 @ 10:01 pm