Personal Finance

Pay Tax or Take out RSP Loan

  • Last Updated:
  • Feb 25th, 2011 3:25 pm
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Jr. Member
User avatar
Apr 1, 2010
127 posts
Medicine Hat

Pay Tax or Take out RSP Loan

Hello,

I have to pay about 2800 to the government in tax this year. However, if I take out 5800 worth of RSPs I will break even. The thing is I am a bit in debt (~4000) and I don't want to break the bank and hamstring myself even further by getting an RSP loan. What is your advice?
5 replies
Deal Fanatic
Jan 17, 2003
8993 posts
1532 upvotes
so if you take out $5800 you will not be getting any refunds?
Deal Addict
Apr 8, 2010
1307 posts
64 upvotes
Burlington
From a purely rational standpoint you can crunch the numbers and see how much interest you would pay on the loan to determine if it would be more or less than the $2800 you owe.
Deal Addict
Jul 8, 2009
2028 posts
482 upvotes
Edmonton
I say borrow for the RRSP contribution and pay it off in a year, if possible. The interest you'll pay is minimal. This assumes you're in one of the top three tax brackets.

Also, it bugs me that people ask how they can avoid paying a couple grand in taxes when they file but ignore the thousands they've paid from every cheque throughout the year. Why not look at getting some of that back?
Member
Jan 11, 2007
256 posts
159 upvotes
You may want to talk to your banker and work out what deal they have on RRSP loan. You may even consider getting more than $5800 and use the tax refund to pay down your other debt.
Jr. Member
User avatar
Apr 1, 2010
127 posts
Medicine Hat
I am in the top tax bracket. I have a part time job that I didn't realize they weren't deducting tax until half way through the year. If I pay the 5800 then I am even steven. I think I am going to take out the loan. That money will grow over the next 30 years so the it's good in the long run.

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