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 2023. If he invests $10,000 into his own or his spouse's RRSP account, he will be taxed almost $3,000 less for the year 2023.
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 2023 is 18% of our 2022 reported income, up to a maximum of $30,780. If Mr. M's reported income in 2022 was also $100,000, he can contribute $18,000 in 2023 at most.
Please be mindful that the contribution made on or before March 1, 2024 can also be applied against 2023 tax reporting, act fast!
You should take advantage of the Home Buyers' Plan (HBP) if you have RRSP and you want to buy a house , I will tell you how later!