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RRSP Tax Deduction Explained

Registered Retirement Savings Plans (RRSP)

Registered Retirement Savings Plans (RRSP) – Tips and FAQs.

What is RRSP?

RRSP stands for Registered Retirement Savings Plans. It is a program approved by the government of Canada that was designed to encourage individuals to save for retirement by providing powerful tax reductions.

The tax break comes with two options:

  1. The money you contribute to your RRSP is deductible from your taxable income, which results in immediate tax savings.
  2. All interest or capital gains in your RRSP are 100% tax-free. That is until you start to withdraw them.

How long can I keep my RRSP limit?

Any part of your unused RRSP deduction limit can simply be carried forward without any time limit.

If I can not afford to put money into the RRSP right now, does the limit keep growing?

If you cannot afford to deposit in RRSP this calendar year, the deduction limit amount is carried over to the next year and gets added to the limit of next year thus accumulating overtime.

What is my RRSP limit and how can I find my deduction limit?

Your RRSP deduction limit can be found on your Notice of Assessment for the previous year. You may also access this information under the “My Account” tab of your CRA account at https://www.cra-arc.gc.ca/myaccount/ or call CRA at 1-800-959-8281.

Can I claim the losses that are in my RRSPs with mutual funds?

No. You cannot deduct mutual fund losses within Registered Retirement Savings Plans.

I have a few RRSP plans at different banks. Can I combine them into one plan at a single bank?

Yes, you can. Contact the institution or bank you want to transfer RRSP funds to. They will contact the other financial institutions. Mostly it is a direct transfer of funds from that account to the next.

RRSPs are among the most effective tax planning tools at year-end.

This is what you need to know about Registered Retirement Savings Plans (RRSPs). You will pay fewer taxes if you contribute more to your RRSP (if the deduction limit is met) 

In the event that you do not have the money set aside for RRSPs, please give us a call, and we will tailor a solution that meets your needs. 

For more personalized advice, call 613.258.4949 or visit www.sheppardandassociates.ca. Obviously, every individual’s tax situation is different, and what works for one person may not necessarily work for another. We are your expert bookkeeping and accounting firm in Kemptville Ontario.

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What happens if I have not filed my INCOME TAX on time?

It can be scary, daunting, overwhelming and depressing. It can even be embarrassing to not file your tax returns for long periods of time. We all run into life’s major detours that put us off track. This can happen with our Income Taxes and related filings after one of Life’s major events. Death of a loved one, business failure or a variety of things can throw us off our game and make the operation of our businesses impossible or unprofitable. Often it is just too much to handle and too big a burden to tackle. The best way to handle it, is to get a good road map of where you need to go from here. Your Accountant, acting as your representative, can make that plan. They can find out what has not been filed, what has not been paid and all the while isolate you from CRA and pull the details together. With years of dealing with Revenue Canada we will know what the minimum requirement is, how to prepare the details that they are asking for and how to get there from here. It will be wonderful to get that burden off your back and have someone on your side who understands. Often it is not as bad as you anticipated, and can all be settled fast. Don’t assume the results until your Accountant has it all calculated. To plan what to do next you really have to know where you are now. Once we prepare the records to give us that data we can look at the alternatives that will be best for you. Just make the call to meet your accountant today.

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