RRSPs – A friend or a foe ?

The RRSP  season is in its prime and the deadline for RRSP contributions for the 2015 Tax Year is February 29th, 2016. It’s a leap year and the first 60 days of the year end on Feb 29th.

Every year thousands of people invest in RSSP’s and a lot of them just do it because they have been advised by their friends or sales managers selling RSSPs.

So is RRSP your friend or foe?

RRSP as the name suggests can be an exceptional retirement saving tool for but only for people who need it. One man’s garbage can be another man’s treasure.

RRSP is not a tax free or a tax saving scheme. It is a tax deferral plan in which you save on taxes when you contribute and you end up paying taxes at a later date when you withdraw money from the RRSP accounts. Ideally an individual should be having a higher taxable income and should fall in higher tax bracket during the contributing(working) years and the individual should be in a lower tax bracket during the withdrawal(retirement) years. Lets solve this puzzle.

RRSP is your friend if:

  • You make more than $44,000 Approx. (Lowest Tax Bracket) in Ontario and there will be a time in future (Retirement Years) when you will be making less than $44,000 annually.
  • You have no pension plan from your employer and you want/have to save something for the retirement years. These savings will be strictly for retirement purposes.

RRSP is your foe if:

  • Your income is less than $12,000 dollars and you are just trying to save some money.
  • You have generous pension plans (Unionized Workers) and chances are that your tax bracket will not change when you retire.
  • You have an investment portfolio otherwise which will generate income in your retirement years and as a result your tax bracket will not change
  • You are trying to save money for an emergency fund and you may need this money any time in the future.  A TFSA account should be used for savings and investments that are not long term and not for the purpose of retirement.

Retirement Planning is very important and a general habit of saving money goes a long way in life but RRSP may or may not be the answer. We at Softron Tax  always tailor our advise according to the needs of the client. One size fits all policy does not work well with personal finances.

So visit the nearest Softron Location today and we will help you decide whether RRSP is your friend or a foe.

Tax season is back! Are you Ready?

The tax season is back and like every year in the past, Softron tax is ready to serve you and get you the biggest refunds.

So are you ready?

Each year taxpayers miss out on a lot of money that they could have received through their tax refund. This happens because taxpayers miss out on claiming important credits that they are eligible for. Today we discuss the credits that every taxpayer in Canada can claim irrespective of his/her marital status, number of dependents or age.

Following are the credits that every taxpayer maybe eligible for:

  • Public Transit passes: Every taxpayer can claim their public transit passes and receive additional tax refund. The only check in the case of public transit passes is that the taxpayer must have either monthly passes or three consecutive weekly passes or presto usage report. It is not possible to claim just a few tokens or randomly bought tickets.
  • Donations: Every taxpayer can claim the donations they make to eligible charitable organizations in Canada. All you need is a donation receipt. That’s not all. If you have missed claiming your donations in the past 5 years, you can claim them altogether in the present tax year and this will only increase your donation credit. So help yourself while you are trying to help others.
  • Political Contributions: 2015 was the election year and a lot of you will be surprised to know that you can claim the political contributions you made during the year. Political contributions can be either federal or provincial and this is important as contributions made to a provincial political party qualify for a refundable tax credit while the contributions made to a federal political party qualify for non-refundable tax credit.
  • Medical Expenses: If you have had any major medical expenses (dental, eye surgery, prescriptions) where you had to pay a lot out of your pocket, you can claim those medical expenses and reduce your tax payable. The medical expenses have to be more than 3% of your income.
  • Rent: While the rent has no impact on an individual’s taxes, rent can be claimed for availing Ontario’s Rent and Property Tax Grant which is part of Ontario’s Trillium Benefit. There can be cases where the taxpayer will not benefit from the rent because the income he made during the year is above the threshold limit but it is important that the rent is discussed with the tax preparer and it is ensured that maximum benefit is claimed.

The professionals at Softron Tax are very competent to get you all the tax credits that you are eligible for but more importantly, we at Softron have a work ethic and an attitude to use all our competence and ability to get the maximum benefit for our customers.

So visit your nearest Softron Tax location and get the tax credits you deserve!