January and February…the time of year when Canadians everywhere wonder “just how much should I contribute to my RRSP?” This question is a doozy, and unfortunately there isn’t one right answer that applies to everyone.
Lots of things can impact your decision. How much cash do you have to invest? How old are you? What’s your marginal tax rate? Are you expecting your income to go up or down in the future? How much is already in your RRSP? Is it better for you to contribute to your TFSA if you can’t afford both?
We can’t answer these questions for you, but if you’ve made the decision to contribute something to your RRSP, you’re probably wondering:
- How much should I contribute so I don’t owe any tax? Or,
- How much should I contribute to get the highest refund possible?
Starting this year, we help you answer these two questions with our new RRSP optimizer. Enter your tax information, click a button, and voilà: instant results!
In this example, our taxpayer earned $60,000 from her employer and claimed a handful of credits and deductions. She also earned income from investments and her small business. Before claiming an RRSP deduction, it looked like she would have a balance owing of about $700.
Our RRSP optimizer told her that she’ll need to contribute $1,959 to eliminate her $700 balance. Before making her final decision, she can enter several different contribution amounts to see just how much tax refund she can get. For example, if she contributes $2,500, she’ll get a refund of $193. A $5,000 contribution? A $1,087 refund cheque.
How much easier can it get?
This is just another one of the many ways we’re making doing your taxes awesome.