An RRSP is a registered retirement savings plan that you establish, and to which you or your spouse or common-law partner contribute. The plan allows you to save for the future on a tax-sheltered basis. Deductible RRSP contributions can be used to reduce your tax.

 

Any income you earn in the RRSP is usually exempt from tax as long as the funds remain in the plan. You generally have to pay tax when you receive payments from the plan.

 

An RRSP is an investment portfolio. It can contain a variety of investments including: RRSP savings deposits, treasury bills, guaranteed investment certificates (GICs), mutual funds, bonds, and even equities.

 

Rules and Regulations:

 

• You may contribute to your RRSP until December 31 of the year in which you reach age 71.
   

• You can contribute to a Spousal RRSP and claim the benefit on your income tax.
   

• You can contribute to your Spousal RRSP account even after you turn 71 if your Spouse is still eligible (under 71) and claim the tax benefit.

   

• The following limits and deadlines apply annually:
  
  Maximum Annual Contribution Limits
   

  • 2015    $24,930
    2016    $25,370
    2017    $26,010
     

  • Your allowable RRSP contribution for the current year is the lower of:
    
    - 18% of your earned income from the previous year, or
    - The maximum annual contribution limit for the taxation year, or
    - The remaining limit after any company sponsored pension plan contributions.

 

• Earned income includes salary or wages, alimony received, and rental income, among other income sources, but does not include items such as investment income.
   

• Annual Contribution Deadline - To be eligible for an RRSP deduction in a specific taxation year, you can make contributions anytime during the year, or up to 60 days into the following year.
   

• If you can't make your maximum contribution one year, you can make up that portion of the contribution in later years by carrying it forward. The amount of your unused contribution limit is shown on your federal Notice of Assessment.
   

• You may also choose to delay claiming your current year's RRSP tax deduction. To take the deduction in a later year, you must make sure that your allowable deduction limit has not been reached.

   

• During separation or divorce, either you or your spouse can transfer existing RRSPs to the other, without being subject to tax, provided that:
  
  - You are living apart when property and assets are settled; and
  - You have a written separation agreement or a court order.

 

RRSP With the Fonds de Solidarity FTQ

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If you reside in Quebec and meet the following conditions, you may want to consider investing with the Fonds FTQ:

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1. A residence of Quebec

2. Have minimum earnings of $3500

3. Be under 65 years of age in during the tax year

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The benefit of investing with the Fond FTQ is the additional savings that it offers. In addition to the usual RRSP deduction which reduces your taxable income and lower your tax, resulting in a tax refund, investing with the Fonds FTQ allows you to benefit from a tax credit of 30% based on 2016 tax year. Unlike the RRSP deduction, this tax credit is a credit that is applied to the bottom line, the tax payable amount. For example, if you contribute $1000 into an RRSP, depending on your income level, you may receive a refund of $280 to $488 or 28% to 49% depending on your income and tax level. With the Fonds, you will get a credit of $300 for a total of $580 (58%) to $788 (78.8%). What this means is a $1000 investment for your retirement will only cost you $420 to $212 compared to $720 to $512 with a regular RRSP.

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At present (2017), the maximum amount that will entitle you to the additional rebate is $5000.

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Go to their website for additional information.

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