Most people we speak with get excited when they receive a tax refund, but it may be because they’ve paid too much income tax throughout the year. Paying too much tax just to get some back is equivalent to providing the government with an interest free loan. Wouldn’t you rather have this money month-to-month and use it as you please? Did you know that if you have regular contributions being deposited into your Registered Retirement Savings Plan (RRSP) you can request to have less income tax taken off your regular paycheques?
Lucette contributes $1,000 per month to her RRSP. She usually receives a tax refund of $4,800*, but would prefer to have control over this money throughout the year. By completing the “Request to Reduce Tax Deductions at Source” form, Lucette is able to increase her paycheque by approximately $400 per month (see your advisor for this form). This increase in cash flow gives Lucette the ability to use $400 today instead of having to wait for her tax refund a year from now. Now she can use that money to increase her regular RRSP contributions, make mortgage payments, or to supplement her daily living expenses.
Speak with your Advisor to see if this strategy will work for you.
*Based on a 40% marginal tax rate.
Colin Sabourin is a Winnipeg based investment & financial advisor with Harbourfront Wealth Management. His specialty is working with farmers who are planning to sell or transition their farms within the next 5 to 10 years.
Disclaimer: The views expressed are those of Colin Sabourin, Certified Financial Planner, and Investment Advisor and not necessarily those of Harbourfront Wealth Management Inc., member of the Canadian Investor Protection Fund.