Not sure how to make a savings plan? Read on…
No one likes to pay fees, but the rate you pay for your investments and how you pay them can be especially troublesome. Making the right decision for your portfolio can be the difference in how much money you earn over the long haul. When it comes to your Registered Retirement Savings Plans (RRSPs).... More »
In ever-evolving circumstances, Prime Minister Justin Trudeau has announced an $82-billion stimulus package to help Canadians and businesses amid the COVID-19 pandemic. These measures aim to stabilize the economy and support Canadians facing hardships. The announcement comes as part of Canada’s C.... More »
Table of contents What is an emergency fund? Why do I need an emergency fund? How much should I keep in an emergency fund? What qualifies as an emergency? What doesn’t qualify as an emergency? How to build an emergency fund Set a monthly budget and find out how much you can set aside Choos.... More »
Investments like stocks, mutual funds, or cryptocurrencies carry some level of risk which you might shy away from for a variety of reasons. Whether you’re saving for college, getting ready to buy a house, or nearing retirement, if you’re looking for safer investment options, here are some o.... More »
As average home prices in Canada top $500,000 (and rise above $1 million in cities like Toronto and Vancouver), some Canadians may wonder if they’ll ever be able to buy the place of their dreams. One option for some is to find another person—a parent, sibling or another close relative—to .... More »
The word “taxes” is enough to give most of us a headache. Paperwork, deductions, contributions, Canada Pension Plan (CPP), this type of tax, and that type of tax, federal and provincial — what a nightmare. The good news is the tax-filing deadline for most Canadians is April 30, 2020, which is still months away. And, unless you are making last-minute Registered Retirement Savings Plan (RRSP) contributions, you won’t have to think about your 2019 taxes for a few more weeks.
Nevertheless, as the new year chugs along, an entirely new set of tax changes will come into effect throughout 2020. Many Canadians will see lower taxes, albeit the changes are subtle.
To start, the basic amount Canadians can earn tax-free will increase by $1,160 to $13,229, which will result in lower federal income taxes. This amount is expected to rise to $15,000 by 2023. But this won’t mean much for those in the top tax brackets, who may not see a benefit at all.
The CPP tax rate is rising by 0.15%, that’s an increase of up to $97 in 2020…
For the first-time RRSP investor, it can be a challenge to understand how RRSPs can save you money. Contributions to your RRSP reduce your immediate tax burden, but you do pay tax on withdrawals. While it’s true that RRSPs may be more properly understood as a vehicle for tax deferment instead of savings, you may still pay less in tax in the long run. Here’s how the math works on RRSPs so you can make the most of this very popular savings vehicle.
How do RRSPs save taxes?
Contributions to your RRSPs reduce the tax you pay for your upcoming income tax payment. The amount of your contribution is tax-free for that year. For example, if you make $50,000 and put $10,000 in your RRSPs, you’ll only pay income tax on $40,000.
You do pay tax, however, whenever you take money out of the RRSP. It is added to that year’s taxable income. Here’s where you can save money with proper planning. If you make contributions during a high-income year, you save on income that would be taxed at a higher rate…