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[OP]
Deal Addict
May 17, 2012
2595 posts
1430 upvotes
ontario

WWYD: taxes owing

In today's installment of what would you do:

You did your taxes and see you will owe a few hundred dollars (500).

Would you top up your RRSP (assuming you have the room) to net out your taxes to 0 or pay the tax man?

Mar 1 deadline is approaching. :)
9 replies
Deal Fanatic
User avatar
Nov 19, 2004
8952 posts
1895 upvotes
Cambridge, ON
All depends on your situation. No one can make that decision for you, especially without knowing more. If you are in a high enough tax bracket that it makes sense to contribute to your RRSP, and you still have space, then it could be a good option.

I'd be ecstatic if I only owed $500.
[OP]
Deal Addict
May 17, 2012
2595 posts
1430 upvotes
ontario
current projections will put my post-retirement taxable income below my current taxable income. with this assumption, rrsp contribution (deferred taxes) > paying tax man today?
Deal Fanatic
User avatar
Jan 27, 2007
5079 posts
941 upvotes
Peterborough
Whats your marginal rate? For $500, Id probably just pay it unless Im getting 30% or more back via the rrsp contribution or if you have enough sitting around to make it work.
[OP]
Deal Addict
May 17, 2012
2595 posts
1430 upvotes
ontario
dutchca wrote: Whats your marginal rate? For $500, Id probably just pay it unless Im getting 30% or more back via the rrsp contribution or if you have enough sitting around to make it work.
marginal rate is a fair bit above 30%. i think it makes sense to contribute in my scenario. i have a bit that was earmarked for TFSA that i can move into RRSP instead

on a side note, kudos to my payroll person for getting it so close. had she been aware of my HBP payback payments, i'd be pretty close to net 0.
Deal Expert
Aug 2, 2001
16802 posts
7044 upvotes
Provided the time required to top up your RRSP is not a big deal to you (e.g. some people would need to make an appointment at their bank) then it seems like the better choice given what you have stated. For me the time it takes would be the driver - if I had to spend an hour going to the bank I would probably skip it.
[OP]
Deal Addict
May 17, 2012
2595 posts
1430 upvotes
ontario
TrevorK wrote: Provided the time required to top up your RRSP is not a big deal to you (e.g. some people would need to make an appointment at their bank) then it seems like the better choice given what you have stated. For me the time it takes would be the driver - if I had to spend an hour going to the bank I would probably skip it.
People still do that?

All self directed, it's juts a couple of key presses.
Sr. Member
Mar 4, 2010
529 posts
227 upvotes
Toronto
definitely top up rrsp if you have the taxable bracket to make it worthwhile. No point in handing over taxes to the government when you can ideally keep it in your own pocket.
Deal Addict
Feb 25, 2007
1324 posts
786 upvotes
Ottawa
For the vast majority of people, investing in an RRSP is a Good Thing, and definitely worth doing if you are able.

Yes there are instances where it can financially backfire a bit
1) if you are a super-saver who would end up in a higher tax bracket post-retirement
2) if you need the money a few years down the road and are forced to withdraw it, losing RRSP room that you could have kept
3) if you end up a year or two later in a higher tax bracket and therefore would have benefited more from the greater deduction later rather than the couple years' of tax-free/deferred investment growth

Unfortunately so much airtime gets taken up by pundits proving they understand the details that people who don't need to be get leery about contributing to their RRSP, since it seems to be so complicated.

I'd say if you have the necessary cash on hand to put enough in your RRSP, and you won't need it for something else soon, go ahead and do it. Don't worry about the "get taxes to 0" bit - don't forget you've already paid a lot of taxes so there's nothing magical about 0 payable/refund. Put in as much as you are able to and want to save for the long haul. Don't put in money you expect to need - except for HBP - shortly.
[OP]
Deal Addict
May 17, 2012
2595 posts
1430 upvotes
ontario
thanks everyone, i decided to put some extra in the rrsp
houska wrote: Don't worry about the "get taxes to 0" bit - don't forget you've already paid a lot of taxes so there's nothing magical about 0 payable/refund.
you're absolutely right, i thought about this some more last night and there is nothing special. if anything, the gov't gave me an interest free loan for $500 this year -- which sure beats a 2k refund (ie. me giving them a loan).

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