Tax Tips for individuals:


1. Maximize your Registered Retirement Savings Plan (RRSP) contribution: There are many good reasons for contributing to a RRSP.


First, your contribution is tax deductible – and the higher your marginal tax rate, the greater your savings.


Second, the income generated by the plan is taxed only upon withdrawal from the plan (usually when you’re retired and possibly in a lower tax bracket).  That means you can build up significant earnings inside your plan on a pre-tax basis.


Thirdly, all or a portion of your annual eligible contributions may be contributed to a plan set up for your spouse or common-law partner. When funds are withdrawn from the spousal RRSP, they are taxed in your spouse’s or common-law partner’s hands at his or her lower tax rate.  

Fourthly, if you are a first time homebuyer you can withdrawal up to $25,000 from you RRSP for qualifying home purchase.  Finally, you can withdrawal up to $20,000 to assist in financing full-time training or education for you or your spouse or common-law partner.


2. Contribute to a Tax-free savings account (TFSA): As of 2009, very Canadian resident individual who is 18 years of age or older can contribute up to $5,000 a year to a TFSA.


Unlike a RRSP, you will not obtain a deduction for contributions to a TSFA in calculating income for tax purposes.


However, you will not include in income for tax purposes any income, losses or gains from investments held within a TFSA, or amounts withdrawn from it.


The amounts withdrawn from a TFSA will also not be included in determining your eligibility for income-tested benefits or credits, such as the medical or age credit or the Old Age Security claw back.


If you do not contribute to a TFSA in one year, the amount can be carried forward indefinitely to future years.


For more tax tips, visit our website at www.GrantThornton.ca or contact Gary Schlenker at our Kelowna office at the addresses below.


Grant Thornton
Telephone: 250-712-6892
E-mail: gschlenker@GrantThornton.ca