Make the Most of Registered Savings Plans (RRSP)

This is the second  one of the series on 7  Tax Tips

Make the Most of Registered Savings Plans (RRSP)

Tip #2 What is a spousal RRSP? The primary benefit of a spousal RRSP is that funds withdrawn can generally be taxed in the hands of the lower-income spouse or partner. The higher-income contributor typically gets a larger tax deduction because of the higher tax bracket. Here’s how it works. If both you and your spouse withdraw $30,000 each in one year, then each person is in a lower tax bracket than if only one of you would withdraw $60,000. It is important to withdraw the money from the separate plans in order for both spouses to benefit from lower tax rates. An added incentive is that if you each have an RRSP, you will both benefit from the nonrefundable pension tax credit and you may be able to reduce or eliminate the Old Age Security (OAS) clawback.

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