Time is running out to make any last-minute contributions to your RRSP for the 2020 tax year.
A Registered Retirement Savings Plan allows Canadians to deposit income and reap the tax benefits until it is withdrawn.
However, after a year where many experienced a job loss or a decrease in income the idea of contributing this year is not a foregone conclusion.
In many ways, the pandemic has further separated people considered to be in the lower-income class and those of the higher income class.
Many Canadians were recipients of the government benefits (CERB, CESB) created to replace income but now face the task of paying off the taxes for it. While many people continue to deal with the financial impacts of COVID-19, anyone who received a benefit with remaining funds may consider contributing to an RRSP.
The amount deposited will reduce your taxable income which could be beneficial considering the government benefits were not taxed before being given out.
Nonetheless, the effects on RRSPs may not be evident for a couple of weeks. The amount you can contribute is 18% of your annual income in the prior tax year. This means many Canadians could see a drop in how much they can deposit next year.
Canadians will have until the March 1st deadline to contribute to their RRSP for the 2020 tax year.
