Personal Finance

Am I understanding RRSPs correctly?

  • Last Updated:
  • Jan 20th, 2019 4:11 pm
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Newbie
Jun 10, 2018
18 posts
8 upvotes

Am I understanding RRSPs correctly?

I’m just wondering if putting money in an RRSP is going to work in my situation. My income and taxes for 2018 are as follows:

Gross: 152879
Taxes: 44842
CPP/EI: 3452

I worked overtime and had different rates of pay over differenent pay periods so my tax rate wasn’t accurate through the year and basically from an online calculator says I should have paid 47659 in taxes.

My question if I put 10000 into an RRSP, is the amount of money I will have to pay taxes on drop to 142879?

And based on that amount the online calculator says I only would’ve owed 43021 and therefore I would get the difference?

I’m planning on using the RRSP as a down payment for first time home buyer, I live in Ontario if that makes a difference.

Am I understanding how an RRSP works for tax purposes?
Any advice or different suggestions?
5 replies
Deal Addict
Nov 10, 2018
4735 posts
5331 upvotes
Undisputed1900 wrote: I’m just wondering if putting money in an RRSP is going to work in my situation. My income and taxes for 2018 are as follows:

Gross: 152879
Taxes: 44842
CPP/EI: 3452

I worked overtime and had different rates of pay over differenent pay periods so my tax rate wasn’t accurate through the year and basically from an online calculator says I should have paid 47659 in taxes.

My question if I put 10000 into an RRSP, is the amount of money I will have to pay taxes on drop to 142879?

And based on that amount the online calculator says I only would’ve owed 43021 and therefore I would get the difference?

I’m planning on using the RRSP as a down payment for first time home buyer, I live in Ontario if that makes a difference.

Am I understanding how an RRSP works for tax purposes?
Any advice or different suggestions?
Yes.
For legal topics and discussions, the opinion, guidance, and thoughts provided are my own and are not considered to be legal advice, in any manner.
Deal Addict
User avatar
Dec 24, 2007
1811 posts
2410 upvotes
BC
Not entirely clear what your question is, so:

#1. Your payroll has deducted $44,842. If you contribute $10,000 into an RRSP and able to deduct the full amount of $10,000 (i.e. you have the deduction room for it from your last Notice of Reassessment) you would owe $43,021, you would get a refund of $1,821.

#2. If you plan on also using that RRSP contribution as a downpayment on a house, you can do that under the Home Buyer's Plan by completing Form T1036 to withdraw that money . However, there is a rule that requires that contribution stay in the RRSP for at least 90 days, ie. you can only withdraw money that has been in your RRSP for more than 90 days at the time you withdraw money for the downpayment. Eg. your RRSP balance from last year is $10,000 and this year you put in $5,000 (and it is not past 90 days at time of withdrawal), then you can only withdraw $10,000.

So, if you plan on making a contribution do it soon if you will need your money for a downpayment soon.
Last edited by WetCoastGuy on Jan 20th, 2019 3:51 pm, edited 1 time in total.
Deal Addict
Nov 10, 2018
4735 posts
5331 upvotes
WetCoastGuy wrote: Not entirely clear what your question is, so:

#1. Your payroll has deducted $44,842. If you contribute $10,000 into an RRSP and able to deduct the full amount of $10,000 (i.e. you have the deduction room for it from your last Notice of Reassessment) you would owe $43,021, you would get a refund of $1,821.

#2. If you plan on also using that RRSP contribution as a downpayment on a house, you can do that under the Home Buyer's Plan by completing Form T1036 to withdraw that money . However, there is a rule that requires that contribution stay in the RRSP for at least 90 days, ie. you can only withdraw money that has been in your RRSP for more than 90 days at the time you withdraw money for the downpayment. Eg. your RRSP balance from last year is $10,000 and this year you put in $5,000 (and it is not past 90 days at time of withdrawal), then you can only withdraw $10,000.

So, if you plan on doing this act soon if you will need your money for a downpayment soon.
I'm not reading this the same way you are. Payroll may have deducted what he claims but we have no idea what his tax owing is so how do you know what he will get back?
For legal topics and discussions, the opinion, guidance, and thoughts provided are my own and are not considered to be legal advice, in any manner.
Deal Addict
User avatar
Dec 24, 2007
1811 posts
2410 upvotes
BC
angryaudifanatic wrote: I'm not reading this the same way you are. Payroll may have deducted what he claims but we have no idea what his tax owing is so how do you know what he will get back?
$43,021 is based on what he says the online calculator has shown after RRSP deduction and whatever other info he included. We have no other information about any other deductions and actual will obviously be different once he files with all other income and expenses. May not get anything - garbage in garbage out.
Banned
Jan 13, 2019
22 posts
5 upvotes
Toronto
Simply put whatever you contribute to RRSPs comes off your income.
Since you are in a high marginal rate contribute the maximum and get the tax you already paid back.
Sounds like you may also get more back since you have been over paying based on the O/T.

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