RRSP season is nothing to sneeze at

RRSP

Enough about flu season – it’s time to stop sniffling and start seriously thinking about RRSP season.

The deadline date for making contributions to the Registered Retirement Savings Plan for the 2012 taxation year is just around the corner on March 1.

An RRSP is a plan that helps you save for retirement while offering you some other great tax benefits. For instance, deductible RRSP contributions can reduce the amount you owe on your income tax or even give you a bigger refund (depending on your income). And, as long as the funds remain in the plan they are exempt from tax as it grows.

You don’t have to make one annual lump sum to contribute to an RRSP either. RRSPs can be made easier to carry through monthly payments that suit your budget needs. However, if you are considering making a lump sum contribution before the March 1 deadline but don’t have the on-hand cash, another option is to talk to your financial advisor about an RRSP loan.

There is a maximum amount you can contribute to an RRSP based on your income and how much you previously contributed. You can contribute 18 per cent of your previous year’s income, up to a maximum of $23,820 in 2013. But keep in mind, if you didn’t contribute the maximum in previous years your deduction limit will be higher. Also, if you contribute to a workplace pension plan your deduction limit will be lower.You can set up a RRSP through your financial institution such as a bank, credit union, trust company or insurance company. You may also want to consider setting up a spousal or common-law partner RRSP. The bonus to this plan is that if the higher-income spouse or common-law partner contributes to the RRSP for the lower- income spouse/common-law partner then the contributor gets the short-term benefit of the tax deduction while the spouse or common-law partner receives the income and reports it on his or her income tax return.

While we’re on the topic of income tax, the deadline for personal income tax is April 30, 2013 while those who are self-employed have until June 15 unless there is a balance owed and then the deadline is April 30, 2013.

As with everything in life, make sure you do your research and find out more about Registered Retirement Savings Plans and the benefits.

Click on the Canada Revenue Agency link for some helpful information on RRSPs.

Will you be considering contributing to an RRSP this season?

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