Maximizing Your Income Tax Refund With RRSP Contributions


Tax season always brings up questions about one popular savings vehicle: the RRSP.

And it’s no wonder. The RRSP is one of the most useful and most complex savings vehicles available to Canadians.

RRSP stands for Registered Retirement Savings plan, and is a tax-advantaged account available to Canadians to help them save for retirement. RRSPs are always a popular topic at tax time because they can drastically affect your income tax return in a very positive way.

How the RRSP works

You can contribute up to 18% of your gross income to an RRSP each year. In years where you do not use all your contribution room, you can carry unused contribution room forward to future years.

In your RRSP, your money grows tax-free until you make a withdrawal, which makes it a great tool to defer, and ultimately reduce, the total income taxes you pay over your working lifetime. When you make contributions to your RRSP now and claim them on your income tax return, you will pay less in income taxes. This usually manifests as an income tax refund, which can be a huge boost to your budget! You receive your income tax refund now, because you will pay income taxes on your money when you withdraw it from your RRSP in retirement.

Using your RRSP contributions to maximize your tax refund

If you’re curious about how much of an income tax refund you can get based on your RRSP contributions, you can typically find out when you file your taxes. With TurboTax there’s a calculator directly in the program that you can use before your file to determine exactly how much you need to contribute to your RRSP in order to maximize your income tax refund!

You actually have until March 1, 2017 to make RRSP contributions for 2016.

This means, you can top up your RRSP in the first few months of the New Year and have it count towards last year’s contributions in order to fully leverage the tax-saving opportunity of the RRSP.

For more tips on filing your taxes online, check out the TurboTax blog.

When should you claim your RRSP contributions?

The key to minimizing the amount of income tax you pay is to claim your RRSP contributions in your highest earning years. This means you should contribute as much as you can afford to your RRSP every year, but claim these contributions in higher income years so you reap the maximum benefits in reducing your taxes.

For example, you might be 27 years old earning $45,000 per year. You’ve diligently contributed $250 per month to your RRSP throughout 2016 for a total of $3,000 in contributions for the year. You recently changed jobs and received a significant raise, which means you will be earning $52,000 plus a bonus in 2017. Your income could be as high as $65,000. This will push you into a higher income tax bracket next year.

In order to reduce the amount of income taxes you will pay for 2016, you will record your $3,000 of RRSP contributions for that year when you file your 2016 income taxes, but you will not claim the contributions until next year when you file your 2017 income taxes. This will give you a larger income tax refund that you can use to further top up your RRSP or help with other financial goals. One of the perks of filing your income taxes with TurboTax is their maximum refund guarantee, so you don’t have to worry that you’re not getting the most money back that you can!

Start saving now

Many Canadians are intimidated by the many options when to contribute, and when to claim your contributions, to an RRSP. But the flexibility of this savings vehicle can help reduce the income taxes you pay which will give you even more money to save! If you haven’t yet, open an RRSP with your bank, and start making contributions to give you a tax break for last year, this year, or in the future!

This post was sponsored by TurboTax. The views and opinions expressed in this blog, however, are purely my own.


  1. Patty

    Hi Bridget,

    Great summary – I hadn’t thought to postpone claiming my RRSP contributions this year, but because of my parental leave (and reduced income) it will be a great year to defer.
    Do you have any TurboTax coupons you can send our way?
    Thanks for the post!