The deadline for contributing to your RSP is coming up shortly, February 28, 2010. With that in mind, have you considered whether you will contribute to a spousal RSP?
Tax Accountant Mississauga – Spousal RSP’s
RSP Benefits -Tax Accountant Mississauga
Generally speaking, the two primary benefits of an RSP are that contributions to an RSP are deductible in computing your taxable income and, secondly, the income earned inside an RSP is not taxed.
Now that you know what the advantages of an RSP, let’s discuss the merits of a Spousal RSP.
Spousal RSP’s Defined – Tax Accountant Mississauga
A Spousal RSP is an arrangement where one spouse contributes to an RSP in the other spouse’s name. It’s just like a regular RSP, but the key difference is that the contributing spouse does not own the RSP.
Similar to a regular RSP, the contributing spouse does receive a tax deduction for the contribution made to a spousal RSP.
The reason the Canada Revenue Agency created spousal RSP’s is to allow for income splitting in your retirement years.
Accountant Toronto – How Spousal RSP works
For example, assume that you are retired and that you have accumulated an RSP having a market value of $1 million. Further assume that your spouse does not have any RSP’s. If you were to withdraw $50,000 from your RSP, then $50,000 would be included in your taxable income.
Now assume that you were wise enough to consult a Tax Accountant in Mississauga, Toronto or in your area, and that you contributed to both your RSP and to a spousal RSP for the last 30 years. Further assume that the value of your RSP upon retirement is $500,000 and the value of the spousal RSP is $500,000. Your tax Accountant Mississauga advised that you should withdraw $25,000 from your RSP and your spouse should withdraw $25,000 from his/her RSP. In this situation, you would include $25,000 in your taxable income and your spouse would include $25,000 in his/her taxable income.
In the second example, the overall tax burden would be less than the first example, because you have split the $50,000 two-ways.
Consult with Tax Accountant Mississauga
You should consult your Tax accountant to determine if spousal RSP’s are right for you.
For more tax tips, please visit 10-best-tax-tips
The information provided on this page is intended to provide general information. The information does not take into account your personal situation and is not intended to be used without consultation from accounting and financial professionals. Allan Madan and Madan Chartered Accountant will not be held liable for any problems that arise from the usage of the information provided on this page.