# RRSP Contribution Question



## marina628 (Dec 14, 2010)

We are just getting our tax papers together and here is my question.My husband's gross income is $90,000 in 2010 ,he can contribute $37,000 in RSP this year.We were only planning on putting in $10,000.Anyone know the tax return he will get on $37,000 vs $10,000?He has paid $23,057 in income tax does not pay into EI because he is majority shareholder of our corporation.


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## plen (Nov 18, 2010)

marina628 said:


> We are just getting our tax papers together and here is my question.My husband's gross income is $90,000 in 2010 ,he can contribute $37,000 in RSP this year.We were only planning on putting in $10,000.Anyone know the tax return he will get on $37,000 vs $10,000?He has paid $23,057 in income tax does not pay into EI because he is majority shareholder of our corporation.


You can try http://www.taxtips.ca/calculators/taxcalculator.htm

A quick plugin shows a $4080 refund for 10k RRSP and a $13,086 refund at $37K


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## sprocket1200 (Aug 21, 2009)

taxtips.ca is a great site. you can also lookup the tax charts that show you the break points. this would be more useful than a calculator. don't forget next years income, if it will be large as well, you could save some of the credits for then.


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## steve41 (Apr 18, 2009)

Just my usual two cents worth..... remember, that tax reduction you make today, if you invest it (as you normally should) will effect your tax situation many, many years down the road when you are forced to deplete your RRSP.

The near term tax hit is not the whole picture, it is the present value of all those future tax pmts over time which will be the determining factor.


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## Guest (Jan 9, 2011)

steve41 said:


> Just my usual two cents worth..... remember, that tax reduction you make today, if you invest it (as you normally should) will effect your tax situation many, many years down the road when you are forced to deplete your RRSP.
> 
> The near term tax hit is not the whole picture, it is the present value of all those future tax pmts over time which will be the determining factor.


And fwiw, when I consider the worth of my RSP, I deduct 30% because that's what it will cost me to get that money back even if withdawn over time ... now, I've had the use of that tax money over the years, but still, it'll cost 30% to get it back


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## steve41 (Apr 18, 2009)

True, but remember three things.... the tax rates in retirement are lower because of the various age credits after 65, the fact that the tax brackets are indexed to inflation, and especially, the 'time value of money' effect.... that tax pmt you are faced with in retirement has to be looked at in present value terms. It is a non-trivial computation.


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## marina628 (Dec 14, 2010)

Thanks for the advise , I think we will try to do the max this year ,next year he should have some deductions from our daughter's education expenses and we are planning to spend on another investment property so should get a bit of a loss there as well.


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## Guest (Jan 9, 2011)

steve41 said:


> True, but remember three things.... the tax rates in retirement are lower because of the various age credits after 65, the fact that the tax brackets are indexed to inflation, and especially, the 'time value of money' effect.... that tax pmt you are faced with in retirement has to be looked at in present value terms. It is a non-trivial computation.


To rephrase ... being in my 65th year, I can state with certainty that my tax rate (federal/provincial) will in retirement be ~30% ...


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## steve41 (Apr 18, 2009)

The OP's question was regarding RRSP investing while working. The same issue (except for the age exemption) still applies. The RRSP/RRIF meltdown strategy depends on the same "would you rather pay $1000 in tax now or $2000 in 10 year's time" argument. The time value of money effect is a major consideration, as is the indexed bracket effect.


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## marina628 (Dec 14, 2010)

My husband is 43 years old so Income is high right now .The main reason I needed to know the refund is that this $37,000 will deplete 60-70% of our cash so i needed to know what we can expect to get back in the refund .


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