Hi,
I immigrated to canada in late 2009.
Was unemployed in 2009 and first few months in 2010. Got employment in May, 2010. My wife is unemployed and a stay at home mother. We have a 2 year old son.
Question:
1. In whose name should i open an RRSP account -my name or my wife's to get a better tax refund?
2. My yearly salary is $85k, but I only earned $55k in 2010 since i was employed from May onwards. What will be my RRSP contribution limit?
3.Since i earned 0 in 2009, my Notice of assessment states that my RRSP contribution room is 0. Can i still make a contribution to my RRSP for 2010, because in 2010 i was employed though i have not yet received my Notice of assessment?
4.Is there any tax startegy that i can use to minimize my taxes-let s ay by transferring income to my wife? If yes, how is it done?
5. Which financial services company should i chose for my RRSP?
Thank you in advance for your help,
Sim
No, you can not make any contribution into RRSP for the tax year 2010.
Be very careful when you contribute any money into RRSP from next year. You DO NOT save tax by contributing money into RRSP you just differ it. When you will withdraw this money during retirement years, you will be paying tax on this money and because it will considered your income it will negatively affect your old age benefits too.
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Location: Western Hemisphere
Posted on: 08-02-11 20:41:42
RSP deduction availability can be considered as a "tax saver" since it could come handy to reduce your tax burden.
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Dimple2001
Make 'Spousal Contribution' so that if your wife is not working after 2 years, she can withdraw 10K (no tax) under her income. This may also vary on your total family income.
Spousal RSP contribution must stay in the account for 2 years and then your spouse can withdraw it.
Experts correct me if I am wrong.
Quote:
Originally posted by RESP
No, you can not make any contribution into RRSP for the tax year 2010.
Be very careful when you contribute any money into RRSP from next year. You DO NOT save tax by contributing money into RRSP you just differ it. When you will withdraw this money during retirement years, you will be paying tax on this money and because it will considered your income it will negatively affect your old age benefits too.
With all due respect, I believe that after 10 years, Govt support for old age pension may not be there. Greece, Ireland etc are good example. I would rather have my own savings then rely on Govt. pension.
Quote:
Originally posted by Nightmare
Quote:
Originally posted by RESP
No, you can not make any contribution into RRSP for the tax year 2010.
Be very careful when you contribute any money into RRSP from next year. You DO NOT save tax by contributing money into RRSP you just differ it. When you will withdraw this money during retirement years, you will be paying tax on this money and because it will considered your income it will negatively affect your old age benefits too.
With all due respect, I believe that after 10 years, Govt support for old age pension may not be there. Greece, Ireland etc are good example. I would rather have my own savings then rely on Govt. pension.
You may be right.. or may be not.. we can't say for sure and that’s why I said one must be very careful when it comes to investing money in RRSP.
Because of this uncertainty, I would park my money in TFSA first and thn would go for RRSP for any money above C$5000.00 to reduce my income tax liability and gain maximum (whatever is available) social security advantage after retirement.
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Dont help others because others have helped you,,,,help others because its the right thing to do!!!
http://www.indopia.in/
Quote:Correct, they are very different animals and require planning to make sure everyone can maximize the benefits by doing both, either, or a combination.
Originally posted by ashedfc
The only problem with TFSA is you don't get the tax deduction like an RRSP (while doing the contribution). And in any economics calculation, its the time value of money which is more important.
A Dollar in taxes saved today is lot more in value than a Dollar in taxes paid when a person is retired & collecting pension. Over the last 100yrs US Dollar has lost 97% of its value (in a simplified language - $1 taxes saved in 1911 is equal to $0.03 in todays taxes).. Hope this clarifies why RRSP has its own value & TFSA cannot replace it.
RRSP is tax-neutral if we assume a fixed rate of return between TFSA investments and RRPS investments (which is a reasonable assumption) and tax rate at contribution and withdrawal to be the same (which may or may not be true).
Under this scenario, TFSA vs. RRSP will probably work out pretty close to each other, including the time value of the tax payable upon RRSP witdrawals.
However, the wild card is the clawbacks of social benefits in cases where RRSP provides substantial income during retirement.
In that case, TFSA may work out better for some people.
If someone is expecting to receive full defined benefit pension like a govt. pension, TFSA may be more advantageous than RRSP (assuming they have any RRSP room at all).
It is hard to have "rules of thumb" in these cases - everyone's situation is indeed different.
On another matter, I do not believe the Canadian govt. can do away with old age credit, OAS, etc. entirely.
There is a huge political and social implication for that.
What is more likely is that the govt. will tweak the policies and taxation to maximize its revenue, while avoiding the ire of retired Canadians.
For example, how the age credit was increased in 2007 while at the same time the income trusts were taxed at source.
Similarly, the TFSA was introduced in 2009 and many people were induced to contribute to TFSA instead of RRSP, thereby saving the govt. some tax refunds.
I think moving forward there will be more and more of such tiny subtle tweaks that will keep the tax revenues flowing (or to use a more populist term, the gravy train flowing), while avoiding the ire of people.
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