I would like some views on these Charitable donations and the complications involved. I am confused!
In my 2006 tax summary I was required to deposit 2700$ to the RRSP. I consulted a tax consultant, he advised me to put in 2000$ as a charitable donation, I would get a MUCH better return. Since this was my first return, he said its not a problem, I can pay RRSP from the following years. He will give me a receit for the amout that I pay and also he asked me to keep a photocopy of the Check.
Is this a shady deal? Please advise if I am being mis-led.
Thanks
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Carpe Diem
Location: Western Hemisphere
Posted on: 29-01-08 08:48:21
Did you donate $2000 to charities? If yes, sure you can take a deduction as long as you attach proof of donation. If your tax advisor is suggesting making one up as a charity, then it is a fraud.
Did you contribute $2700 to the RRSP? If yes, you have available deductions this year or in any future years.
Your verbiage is not absolutely clear. However, from what you have written it looks like your tax consultant is being too "helpful" and "creative".
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Dimple2001
Thanks for your reply dimple2001.
I have paid $2000 against charity and have a receipt and also a photocopy of the check that i paid. i am not contributing anything towards rrsp this year (just to get better return) as this is my first year and i need some funds to setup here. will this be viewed negatively by the revenue dept? i have heard that i will be issued a letter for not contributing to rrsp. is this true?
thanks in advance.
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Carpe Diem
Location: Western Hemisphere
Posted on: 29-01-08 16:33:14
I don't think Revenue Canada cares if you contribute or not. However, if you are allowed to contribute and you didn't, you have lost the opportunity of having money available for future deduction and letting money grow tax free.
Returns are all about cost averaging. If you invest when the market is down, you get more shares per dollar and gives your money a chance to grow when the market swings up.
Anyway, it's your personal choice. Hope this helps.
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Dimple2001
RRSP is a voluntary contribution/investment - Govt. cannot penalise you for not investing/saving for your own future, unless ofcourse you have past withdrawal from your RRSP account under first time home buyers plan, which does not seem to be your case.
The deduction for the charity donation is anyways allowed irrespective of the fact you invest or dont invest in RRSP. Also, you could invest this year, but DONT claim deduction from your income if you expect your income to grow 'considerably' in the following years. Deciding on the time to invest and the vehicle to invest into is matter of your personal convienence and preference OR as per your investment advisor's opinion.
Best luck.
Hiren
thanks for the info dimple2001 and hchheda!
appreciate your advice.
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Carpe Diem
Location: carl sagan's universe
Posted on: 29-01-08 23:33:58
Quote:
Originally posted by rainwalkin
I would like some views on these Charitable donations and the complications involved. I am confused!
In my 2006 tax summary I was required to deposit 2700$ to the RRSP. I consulted a tax consultant, he advised me to put in 2000$ as a charitable donation, I would get a MUCH better return. Since this was my first return, he said its not a problem, I can pay RRSP from the following years. He will give me a receit for the amout that I pay and also he asked me to keep a photocopy of the Check.
Is this a shady deal? Please advise if I am being mis-led.
Thanks
May I ask to which charity the money went to? Also money donated to charity is gone to another entity, whereas money in your RRSP is with you. So you have that plus the tax return which can be put towards an RRSP to increase it and help you pay for your down payment on the home, as I understand from your post you just hit Canada recently and I am assuming you do not have a home of your own as yet.
You may get a better 'return' thru donation, in the sense that your tax returns are higher on anything above $200, but you are 2000 dollars out of pocket. By contributing to an RRSP, you have the $2,000 plus the tax return, say $600, if you are in the 30% tax bracket, so you have a total of $2,600. How much do you get in hand after donating $2,000 to charity?
Unless of course, you are of the type that feels like a million bucks for having donated to charity.
Can you please explain the better 'return' part for our edification?
