Don't stress out about the RRSP deadline
THE STACK #8I'm sure by now you're being inundated with countless marketing about the RRSP deadline.
I'm here to tell you not to fret because it's not as big of a deal as these banks make it out to be.
So let's get into some RRSP quick facts.
THE STACK
RRSP QUICK FACTS
1. What is the eligibility for an RRSP?
To be eligible to contribute to an RRSP, you need the following:
☞Must be earning income
☞Must be a Canadian Resident
☞Have a valid Social Insurance Number (SIN)
2. What is the RRSP contribution limit?
The RRSP contribution limit is 18% of the previous year's income, up to a limit of $30,780 for 2023.
3. What are the benefits of an RRSP?
Save on taxes - When you contribute to your RRSP, you can lower your taxes by claiming your RRSP as a tax deduction (this is why the banks keep harping on ya!).
If you make higher income when you contribute and less income when you withdraw, you will save on taxes.
Tax-deferred growth - Your investments do not get taxed as long as they stay inside the account. However, your investments will be taxed when you withdraw.
4. Can you carry over your RRSP contribution room?
Yes, if you're making less income now or do not have enough funds to contribute to your RRSP, your unused contribution room will be carried over to the following years.
This is why you don't need to fret about these so-called RRSP deadlines. If you cannot contribute to the previous tax year, no problem! You can make up for it in the following year.
5. Can you defer your RRSP tax deduction?
Absolutely! You can contribute in 2021 but choose not to claim that contribution. You can defer it to the following year.
For example, if you make a $3,000 contribution in 2021, you can decide to defer the tax deduction to 2022. Let's say in 2022. You also contribute $3,000. Now you can claim $6,000, reducing your taxes much more.
So again, don't panic about not meeting the RRSP deadline. You can defer the tax deduction until next year and get even more money back!
6. Can you lose your RRSP contribution room?
If you withdraw from your RRSP, kiss your contribution room goodbye because it will be gone forever!
THE TOOL
Looking to file your taxes yourself? You can use Turbotax to self-file.
I have been using Turbo-tax to file my taxes for the last seven years.
I love how I can see how much taxes I owe as I am filing.
They also have a feature that lets you increase your contributions to see how much refund you could get.
THE ACCOUNTABILITY
NETFILE is officially open, which means you can officially start filing your taxes!!! Hoorayyyy 😏
Here are a few deadlines you should note:
🗓 Receipt of T4 slips from Employer -February 28th, 2022 (if you have not received your T4, reach out to your employer)
🗓 Contribution to 2021 RRSP - March 1st, 2022
🗓 File 2021 income tax for individuals - May 2nd, 2022
🗓 File 2021 income tax for self-employed - June 15, 2022
THE COURAGE
THE KNOWLEDGE
TAX RETURN VS TAX REFUND
I often hear people use the terms tax return and tax refund incorrectly.
Essentially, a tax return is what you give to the CRA, and a tax refund is what the CRA gives back to you.
Tax return: This is the form you fill out to the CRA to report your income, expenses and other tax obligations.
To use this correctly, say, "I will be filing my tax return on Friday."
Tax refund: This is a reimbursement from the CRA for overpaying taxes. A refund can result from using tax deductions and tax credits.
To use this correctly, say, "I will get a tax refund of $567 from the CRA this year."
The next time you hear someone misuse these terms, kindly ask them to subscribe to THE STACK....🤣
That's it for this week's STACK!
Talk to you next week,
But until then...Keep Stacking!
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