Registered Retirement Savings Plan Deduction

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Registered Retirement Savings Plan Deduction

A tax deduction one takes from contribution to a Registered Retirement Savings Plan. An RRSP is an account into which a worker makes contributions up to a certain limit throughout his/her working life, and from which he/she begins to take distributions following retirement. The contributions one makes are taken out of one's taxable income. The trade-off for an RRSP deduction is the fact that distributions are taxable. The RRSP deduction can reduce one's tax liability in the years contributions are made, but it is especially important because the taxation on distributions almost certainly results in lower tax liabilities after retirement.
References in periodicals archive ?
However, the employee also gets a corresponding RRSP deduction equal to the employer contribution, in addition to his or her own personal contributions (whether byway of payroll deductions or lump sum contributions).
Using the CRA's RRSP Deduction Limit Statement as a model, Table 5 shows the kind of annual pension accumulation statement the CRA might issue each year.
In such a case, the distribution included in income will be offset by an RRSP deduction.
These credits, when added to the RRSP deduction, can lead to an astonishing 80% income tax refund on the amount invested.
However, the employee is also entitled to deduct the full amount of RRSP contributions, whether made personally or by an employer, within the limits of his RRSP deduction room.
You should still receive an RRSP contribution slip, and report the amounts as income, claim the RRSP deduction and complete Schedule 7 with your tax return.
Townson claims that RRSP deductions benefit "a minority of people, mostly men, mostly at the high end of the income scale.