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Tax Tips to Optimize Savings

Lloyd Litke |
Categories
Tax Planning
tax efficient retirement
tax smart
RRSP vs TFSA
First time homebuyer
what to do with extra savings

Maximize RRSP Contributions

  • Many people wait until the RRSP deadline to make contributions, but contributing early can help you avoid the rush and the stress of trying to meet the deadline. Also, by making your contribution early, you may also benefit from potential upswings in the market.

  • Please note the deadline for 2024 RRSP contributions is March 3rd, 2025.

  • Any RRSP over-contribution exceeding $2,000 is subject to a 1% per month penalty, so it’s important to know your available contribution room. The annual limit is 18% of your earned income from the previous year (2023).

  • Investments in your RRSP grow tax-free until withdrawal, typically during retirement when your income may be lower.

  • If you haven't contributed the full amount in previous years, you can carry forward unused contribution room and catch up.

    Consider Maximizing your TFSA Contribution

  • TFSA contributions are made with after-tax dollars, but investment growth and withdrawals are completely tax-free.

  • The contribution limit for 2025 is $7,000. Over time, unused contribution room is carried forward, and withdrawals are added back to your contribution limit the following year.

    Contribute to a RESP

  • The federal government provides matching grants (the Canada Education Savings Grant, or CESG), with contributions up to a certain limit.

  • The CESG is paid at a rate of 20% on the first $2,500 of contributions each year, to a lifetime maximum of $7,200 per child.

  • If you can’t maximize the CESG in a year, there are catch-up provisions available.  Up to a maximum of $1,000 in CESG can be received when catch-up contributions are made.

Split Income Through Spousal RRSPs

  • If you have a spouse or common-law partner with a lower income, you can contribute to a Spousal RRSP. This allows you to reduce your taxable income.

Consider contributing to a FHSA

  • Similar to an RRSP, contributions to an FHSA are tax-deductible. This means that the amount you contribute to the FHSA will reduce your taxable income for the year.

  • The annual contribution limit for the FHSA is $8,000 (as of 2025), with a lifetime contribution limit of $40,000.

  • The money in your FHSA grows tax-free while it is in the account, and withdrawals are tax-free, provided they are used for the purchase of your first home.

Reaching out to your financial advisor is a key step in optimizing your tax savings. We are here to help ensure that you’re making the most of available tax-advantaged accounts, such as RRSPs, TFSAs, FHSAs, and more. Feel free to reach out to schedule a meeting if you have any questions about your tax situation.

 

Source: https://www.sunlifeglobalinvestments.com/en/insights/investor-education/tax-and-estate-planning/tax-tips-optimize-savings-registered-accounts/

This content is developed from sources believed to be providing accurate information. The information provided is not written or intended as tax or legal advice and may not be relied on for purposes of avoiding any Federal tax penalties. Individuals are encouraged to seek advice from their own tax or legal counsel.