Personal Finance

Buy more RRSP to get more CCB?

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  • Feb 13th, 2017 11:41 pm
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[OP]
Member
Jan 4, 2004
428 posts
76 upvotes
Richmond

Buy more RRSP to get more CCB?

Hi,

Is there any kind of calculator out there or article which talks about the benefits of contributing more RRSP in order to receive more CCB? (Child Card Benefits).

Thanks in advance!
17 replies
Deal Fanatic
Feb 1, 2006
9618 posts
851 upvotes
Muskoka
At our income levels with 2 kids, our $40k in RRSP contributions for 2016 will get us an extra $2,280 in CTB for July 2017-June 2018 period. That's an extra 5.7% on each dollar we contribute, pretty decent. Then we also put all that CTB into RESP's, so 20% free on top of that.

The general rule of thumb that lower income people shouldn't contribute to RRSP's is not as useful if you have children, especially if you have a few of them, and especially if you are very low income. The benefits really start increasing when you get below $70k family income. This article is outdated, but the concepts are still useful - https://www.canadianmoneysaver.ca/how-t ... x-benefit/

You can also use RRSP's to get yourself out of an Ontario Health Tax bracket, and to increase an HST refund.

For seniors, another very illuminating article on the unintended effects of our tax and benefit system is here - http://www.milliondollarjourney.com/tfs ... eniors.htm
[OP]
Member
Jan 4, 2004
428 posts
76 upvotes
Richmond
Thanks Bullseye! Helps a lot.
Member
Dec 6, 2016
203 posts
102 upvotes
Calgary, AB
Bullseye wrote: At our income levels with 2 kids, our $40k in RRSP contributions for 2016 will get us an extra $2,280 in CTB for July 2017-June 2018 period. That's an extra 5.7% on each dollar we contribute, pretty decent. Then we also put all that CTB into RESP's, so 20% free on top of that.

The general rule of thumb that lower income people shouldn't contribute to RRSP's is not as useful if you have children, especially if you have a few of them, and especially if you are very low income. The benefits really start increasing when you get below $70k family income. This article is outdated, but the concepts are still useful - https://www.canadianmoneysaver.ca/how-t ... x-benefit/

You can also use RRSP's to get yourself out of an Ontario Health Tax bracket, and to increase an HST refund.

For seniors, another very illuminating article on the unintended effects of our tax and benefit system is here - http://www.milliondollarjourney.com/tfs ... eniors.htm
Did you include the income tax refund you would get back from your RRSP contributions in your 5.7?
[OP]
Member
Jan 4, 2004
428 posts
76 upvotes
Richmond
Ok so after reading that thread and the articles, it seems like it is a good idea to buy additional rrsp as much as I can, but from what I can tell, there are no "jumps" in benefits no matter how much rrsp I buy.
Ie if my t4 is 90k, and my wife has not worked... With two kids. My rrsp carry over is around 35k not including this tax years.... There is no way for me to buy so much rrsp that I'd get max ccb...

So now the question would be... I currently have approximately 20k rrsp already purchased this year... Is it worth it to do everything I can to do something crazy like 40k? Or better just to buy 20k a year for the next few years....
Deal Fanatic
User avatar
Sep 23, 2009
5062 posts
2249 upvotes
Just for CTB (not considering other income taxes) ....

Utilizing the calculator above ....

For 2 Kids (under 6),

$90,000 : $554 a month. (Annually, that's $6,650.)
$70,000: $649 a month. (Annually, that's $7,790.)
$50,000: $841 a month. (Annually, that's $10,100.)

As you can see the second $20,000 contribution adds quite a bit. In fact, it's an 11.55% return.

For 2 Kids (over the age of 6),

$90,000 : $387 a month. (Annually, that's $4,650.)
$70,000: $482 a month. (Annually, that's $5,790.)
$50,000: $675 a month. (Annually, that's $8,100.)

Even if kids are older, the second $20,000 contribution has a return of 11.55%

Note: You need to consider that contributing that much will also see a slight decline on your RSP return on tax reduction.
Deal Fanatic
User avatar
Sep 23, 2009
5062 posts
2249 upvotes
More math ...

If you have 2 kids under 6

Contributing $20,000 this year and $20,000 next year: $15,580
Contributing $40,000 this year and $0 next year: $16,750

Difference: $1,170 (7.5% difference)

If you have 2 kids over the age of 6

Contributing $20,000 this year and $20,000 next year: $11,580
Contributing $40,000 this year and $0 next year: $12,750

Difference: $1,170 (10.1% difference)

This is useful to know if you don't have the money today.

This would help in knowing whether it is worth it to get an RRSP loan or not.

Again, this is only looking at CCB. We haven't looked at the loss of tax reduction.
Deal Fanatic
User avatar
Sep 23, 2009
5062 posts
2249 upvotes
Even more math. (For BC ... because OP is from BC)

http://www.taxtips.ca/calculators/basic ... ulator.htm

I don't know your exact amount ... so will just use an even $90,000 -

$90,000 of employment income in 2016 brings $20,073 in taxes
$70,000 of employment income in 2016 brings $14,012 in taxes
$50,000 of employment income in 2016 brings $8,372 in taxes

$90,000 of employment income in 2017 brings $19,920 in taxes
$70,000 of employment income in 2017 brings $13,926 in taxes
$50,000 of employment income in 2017 brings $8,286 in taxes

So, from a baseline of $39,993 taxes owed (that is $90K both years ... no deductions)

Contributing $20,000 this year and $20,000 next year: $ 12,055 ($27,938 owing)
Contributing $40,000 this year and $0 next year: $11,701 ($28,292 owing)

What this means is that you will lose $354 by contributing $40,000 in 2016 and $0 in 2017 compared to contributing $20,000 in each year.

So, this would bring the $1,170 difference (same for both above) down to $816

Comparing the difference between the 2 possibilities listed above:

2 Kids Under 6: 5.2% difference (compared to 7.5% above)
2 Kids Over 6: 7.0% (compared to 10.1% above)
Deal Addict
Jul 15, 2009
2248 posts
1393 upvotes
I posted this a while back, but it seems relevant here.

The CCB clawback rates depend on number of children, and there are two sets of rates depending on family income. For family income between $30k and $65k, they are:
1 child 7.0%
2 children 13.5%
3 children 19.0%
4+ children 23.0%
For family income over $65k, they are:
1 child 3.2%
2 children 5.7%
3 children 8.0%
4+ children 9.5%

Source: 2016 budget (table 2)
[OP]
Member
Jan 4, 2004
428 posts
76 upvotes
Richmond
renoldman wrote: Even more math. (For BC ... because OP is from BC)

http://www.taxtips.ca/calculators/basic ... ulator.htm

I don't know your exact amount ... so will just use an even $90,000 -

$90,000 of employment income in 2016 brings $20,073 in taxes
$70,000 of employment income in 2016 brings $14,012 in taxes
$50,000 of employment income in 2016 brings $8,372 in taxes

$90,000 of employment income in 2017 brings $19,920 in taxes
$70,000 of employment income in 2017 brings $13,926 in taxes
$50,000 of employment income in 2017 brings $8,286 in taxes

So, from a baseline of $39,993 taxes owed (that is $90K both years ... no deductions)

Contributing $20,000 this year and $20,000 next year: $ 12,055 ($27,938 owing)
Contributing $40,000 this year and $0 next year: $11,701 ($28,292 owing)

What this means is that you will lose $354 by contributing $40,000 in 2016 and $0 in 2017 compared to contributing $20,000 in each year.

So, this would bring the $1,170 difference (same for both above) down to $816

Comparing the difference between the 2 possibilities listed above:

2 Kids Under 6: 5.2% difference (compared to 7.5% above)
2 Kids Over 6: 7.0% (compared to 10.1% above)
Wow renoldman...this is EXACTLY what I needed...thank you so much! really appreciate it!
Deal Addict
User avatar
Dec 14, 2007
3102 posts
1515 upvotes
I did a few charts a while back... I'll just pop that here... you can see the amounts go up considerably lower than 65k:

Incomes in all these charts are from 30k to 200k. And all examples includes 1 child over 6, 1 child under... which I would think is one of the most common.

Image

Oh... and another one which shows how it contributes to the Progressive tax system:
Image

This one is just a straight comparison... to contrast with the one that shows how taxation and CCB equalize...
Image

And finally... if all families of 2 just received 8k of cash, regardless of income... how would that compare to CCB, as a % of their yearly income. This one is interesting... as it shows how much a lower income family depends far more heavily on the CCB:
Image

ENJOY!
I'd love to write history... in advance.
AMEX Biz Plat 75K AGAIN! | Plat 60K | Biz Gold 40K | Gold 25K | SPG 20K
Deal Addict
May 12, 2014
2926 posts
2687 upvotes
Montreal
Something else to consider for people from Quebec: Daycare costs. It seems that the tax credit you get for daycare costs is also based on income, which I assume is after RRSP contribution. So, the lower your income the more subsidy you get for daycare costs.
Deal Fanatic
Feb 1, 2006
9618 posts
851 upvotes
Muskoka
Karebear77 wrote: Did you include the income tax refund you would get back from your RRSP contributions in your 5.7?
Nope, 5.7% is the return for over $65k with 2 kids.
Member
Mar 6, 2015
292 posts
210 upvotes
Quebec, QC
I generally play with the whatever program we're using to do our taxes sometime in late February to decide if and how much of a lump sum RRSP contribution we need to made each year on top of our regular monthly contributions. It makes a huge difference for us. I've also noticed that there are points that adding $100 to our RRSP will result in an extra $1 in out pockets over not contributing that $100. Which is insane and should never be able to happen--make $100 extra, have $1 less in your pocket.
[OP]
Member
Jan 4, 2004
428 posts
76 upvotes
Richmond
Thank you soooooo much atomiton!
Deal Addict
User avatar
Dec 14, 2007
3102 posts
1515 upvotes
gti303 wrote: Thank you soooooo much atomiton!
No problem. Those charts were fun to make. Collecting the data was tedious, but the result was worth it.
I'd love to write history... in advance.
AMEX Biz Plat 75K AGAIN! | Plat 60K | Biz Gold 40K | Gold 25K | SPG 20K

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