Tuesday, January 26, 2010

Reduce The Amount Of Income Tax With Registered Retirement Savings Plan RRSP

What is an RRSP? RRSP is a registered Retirement Savings Plan. It is an investment account registered with Government of Canada and designed for savings toward individual's retirement years. RRSP has special tax benefits. By contributing to RRSP individuals can reduce the amount of income tax to be paid every year. That is if you contribute enough you can bring your income to the lower income tax bracket. Note that there is maximum you can contribute every year. This information can be collected from the individuals Income Tax Notice of Assessment issued every fiscal year.

The money you put away has tax-deferred growth potential. That is individual can invest that money every year, grow and will not have to pay tax on the profits in the account. It is tax sheltered but until individual decides to withdraw this money, usually when retired. Note that contribution can only be made by the individual who is earning income taxable in Canada. This includes individual's salary, self-employed income, rental income. Check with your RRSP provider or Canada Revenue Agency CRA for other options. To invest in RRSP you can do that through most of banks in Canada, trust companies and financial institutions.