RRSP : What You Need to Know

The deadline to contribute to your RRSP for the 2018 tax year is March 1, 2019, and with the deadline nearly here, we at Softron are sharing our expertise regarding what you need to know about RRSPs.

What is an RRSP?

RRSP stands for Registered Retirement Savings Plan. An RRSP can be a valuable vehicle to save one’s money for their golden years. The RRSP allows for individuals to contribute parts of their income into the plan tax-free. Contributors are allowed to deduct a portion of their contributions from their taxable income as well, resulting in less tax paid during the year.

Home Buyers’ Plan

Thinking of buying a home in the near future? You can withdraw up to $25,000 from your RRSP in order to purchase or build a home under the Home Buyers’ Plan. To qualify for this option you must be a first time home buyer and the funds must be repaid to the RRSP within 15 years.

Lifelong Learning Plan

Want to go back to school to pursue your dream job? The Lifelong Learning Plan allows you to withdraw from your RRSP in order to finance full-time education for you or your partner. The Lifelong Learning Plan cannot be used to finance your children’s education and you must repay one tenth of the amount that you withdrew every year until the amount is placed back into the RRSP.

Turning 71

The year you turn 71 is the last year in which you can contribute to your RRSP. During this year you must choose to either withdraw your funds, transfer them to an RRIF, or use them to purchase an annuity.

Contribute to your RRSP before March 1, 2019 in order to be eligible for the tax deduction for the 2018 tax year. Our tax experts at one of our locations are always happy to help with preparing your return or download our TaxTron software to file your return online!

 

2019 Tax Changes: It’s a mixed bag

It’s that time of the year again. While everybody is starting to get their paperwork ready for the 2018 tax return, we at Softron are ready to do our best to save you tax dollars. This year is a mixed bag when it comes to tax credits.

The tax changes that will impact your tax returns are discussed as follows:

Climate action incentive payments:

Everybody gets a refund and it’s good for the environment too! Well, everybody may not get a refund, but this non-refundable tax credit will definitely lower your tax owing. A family of two adults and two children is qualified for a tax incentive of $307.00.  So even if you had no income in 2018 and paid no taxes, you will qualify for a tax refund this year.

TOSI Rules

The government has changed tax laws around income sprinkling. A tax on split income may be applicable in some cases for children under 18 years at the highest rate of 33%. So, if you child receives any income from your business, partnership, rental property or trusts, it is highly recommended that you should discuss your tax situation with an expert at Softron to ensure that your taxes are filed accurately, and you are best advised on your case.

Expanded Medical Tax Credit:

The medical tax credit has expanded. Patients can now claim any money they spent on prescribed medical marijuana. Keyword here being “prescribed”. Also, couples that are undergoing fertility treatments and spending money on treatments like IVF, can now claim all their expenses under the medical tax credit.

Credits that got the Axe:

·         Public Transit Tax Deduction is no longer applicable. It will make a big difference in for people living in Greater Toronto Area as public transit costs can be very high depending on the type of commute.

·         No fitness or arts tax credit for money spent for arts and fitness activities of children.

·         No education and text book credits for students. Recently Ontario government also announced scrapping of free tuition for children from lower income families. So, increasing education costs combined with reduced tax credits will put financial pressure on students.

As I said, it’s a mixed bad and some tax rules can be complicated and confusing. Therefore, prepare yourself by asking your tax accountant all the questions that seem relevant to your case and we at Softron will advise you to ensure you save money on taxes.