VANCOUVER, April 5, 2017 – Make saving money a habit. With one month left to file your 2016 tax return, now is the time to consider the ways you can save in 2017. Here are some tips from the Chartered Professional Accountants of British Columbia (CPABC) to help you maximize the benefits of your savings for the 2017 tax year:
1. Contribute early to an RRSP
Consider making an early contribution to your RRSP for the 2017 tax year. Contributing to your RRSP at the beginning of the year starts the tax-free compounding of earnings within the RRSP earlier. Also, consider monthly contributions to your RRSP throughout the year as opposed to a lump sum contribution before the contribution deadline for the 2017 tax year. Don’t forget to check your RRSP deduction limit. Your 2017 RRSP deduction limit will be reported on your 2016 Notice of Assessment from the Canada Revenue Agency.
2. Save your RRSP tax deductions for the future
You can make an RRSP and not claim a tax deduction in the year you make the contribution, if you think your marginal tax rate will be higher in the future. If your un-deducted RRSP contributions do not exceed your RRSP deduction limit plus $2,000, they can be carried forward indefinitely for deduction in future years, without penalty. This could provide you with some tax deductions in the future.
3. Contribute to your Tax Free Savings Account (TFSA)
If you are 18 years or older and are a Canadian resident, you can contribute to a TFSA. For 2017, the contribution amount is $5,500. If you have never contributed to a TFSA account since its inception in 2009, your total TFSA contribution room is $52,000. Contributions to TFSA are not tax deductible and the contribution room can be carried forward indefinitely. Unlike RRSPs, your TFSA contribution room is not lost when you make a withdrawal. Note that TFSA contributions follow the calendar year unlike RRSP contributions.
4. Investments in your TFSA
Any investment income and capital gains earned in your TFSA are tax free. TFSAs are generally allowed to hold the same investments as RRSPs. This includes cash, mutual funds, publicly traded securities, GICs, bonds, and certain shares of small business corporations. The Canada Revenue Agency only tracks TFSA contribution room for eligible individuals who file personal tax returns, which means you should file a return if you are 18 or older even if you do not have any taxable income.
Learn how to save more with CPABC’s RRSP and Tax Tips at www.rrspandtaxtips.com.
NOTE TO JOURNALISTS: Local CPAs are available for interview. Infographic is available for reprint.
Please credit Chartered Professional Accountants of British Columbia (CPABC) for use of the content and include the following disclaimer: Tax rules relating to these RRSP tips are complex. This is not intended as tax advice and you should not make tax decisions based solely on the information presented in these tips. You should seek the advice of a chartered professional accountant before implementing a tax plan or taking a tax filing position.
About CPA British Columbia
The Chartered Professional Accountants of British Columbia (CPABC) is the training, governing, and regulatory body for almost 35,000 CPA members and 5,500 CPA students and candidates. CPABC carries out its primary mission to protect the public by enforcing the highest professional and ethical standards and contributing to the advancement of public policy. CPAs are recognized internationally for bringing superior financial expertise, strategic thinking, business insight, and leadership to organizations.
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For more information or to arrange an interview, contact:
Vivian Tse, Public Affairs Specialist