Quote:
Originally Posted by mr_chin
It's that time of the year again, and I'm battling if I should contribute this year. I haven't contributed any throughout the year.
Will I benefit much if my contribution doesn't bring me to a lower tax bracket? Well, obviously there is a little benefit of some sort, but I mean in a strategic sense.
|
You need to understand how the Canadian tax system works. I hate it when people say you should contribute to your RRSP to bring down your tax bracket. It doesn't work like that. Our taxes are layered. So let's say you get taxed 30% on your income at your income bracket, you get $0.30 back for every dollar you contribute. When you go into the next bracket which taxes 26%, you get $0.26 for every dollar you contribute within that bracket.
So no matter how far you are from the next bracket, you are lowering your average tax rate by reducing the amount of income taxed at your highest bracket.