In February, you may hear or see the word "RRSP' from everywhere. How can we take advantage of it? The best part of RRSP is deferring the tax payment until your withdrawal.
For example, Mr. M in Ontario earned $100,000 in the year 2024. If he invests $10,000 into his own or his spouse's RRSP account, he will be taxed approximately $3,000 less for the year 2024.
Mr. M has different choice on where to invest his RRSP, such as Savings account, Mutual Fund, Stock, Bond, GIC and etc. He will not be taxed until he withdraws the money from his RRSP account, in other words, the income tax will be deferred.
Mr. M has different choice on where to invest his RRSP, such as Savings account, Mutual Fund, Stock, Bond, GIC and etc. He will not be taxed until he withdraws the money from his RRSP account, in other words, the income tax will be deferred.
The RRSP contribution limit for 2024 is 18% of our 2023 reported income, up to a maximum of $31,560. If Mr. M's reported income in 2023 was also $100,000, he can contribute $18,000 in 2024 at most.
Please be mindful that the contribution made on or before March 3, 2025 can also be applied against 2024 tax reporting, act fast!