TORONTO--(BUSINESS WIRE)--Ahead of the February 29 contribution deadline, few Canadians are planning to contribute to their Registered Retirement Savings Plan (RRSP) as part of their tax filing plans.
A new study commissioned by H&R Block shows only 18% of Canadians have contributed or are planning to contribute to an RRSP this tax season. This compares to 23% of Canadians who say they plan to contribute, or have contributed to, a Tax-Free Savings Plan (TFSA).
The reason why more people may not be taking advantage of the deadline is because they may not fully understand how RRSPs and TFSAs factor into their taxes. According to the survey, only 50% of Canadians said they understand the different ways TFSAs and RRSPs impact their tax returns.
“By this time of year, people should have a clear picture of how much money they made last year,” says Caroline Battista, senior tax analyst from H&R Block Canada. “The RRSP contribution deadline is 60 days into the New Year. It gives people an opportunity to calculate their 2015 taxable income and consider contributing to an RRSP in order to reduce it. If they decide not to contribute by February 29, the contribution room carries forward to next tax season.”
Filers should know that RRSP contributions are a tax deduction. TFSA contributions are not, so they do not impact a person’s tax situation. A person must have earned income to contribute to an RRSP. And, to take full advantage of the future tax benefits associated with RRSPs, people must file a tax return every year that they have earned income.
The survey from H&R Block also found that:
When deciding between an RRSP or TFSA people most considered:
- If money can be withdrawn without penalties (37%)
- Saving goals (36%)
- Reducing tax obligation (35%)
- Canadians aged 35-54 are most concerned with reducing their tax obligations (38%)
- Canadians aged 18-34 are most concerned with achieving their savings goals (55%)
- 67% said that the change to TFSA contribution limits, a highly discussed topic during the federal election, does not impact their decision to invest
Effective tax preparation and planning are year-round activities; they don’t start when you file. Canadians are encouraged to take time to understand how they can take full advantage of credits and deductions, particularly those associated with RRSPs. For more information about how to navigate their taxes, clients can visit one of H&R Block’s offices, online at Tax Talk Blog, or join the conversation by following #HowToRefund.
About H&R Block Canada
H&R Block Canada is the leading tax preparation firm in the country, with more than 50 years of Canadian tax return experience. Headquartered in Calgary, Alberta, the company serves Canadian taxpayers in 1,200 offices across the country. H&R Block Canada, Inc. is a subsidiary of H&R Block, Inc., a diversified company with subsidiaries providing a wide range of financial products and services. Additional information about H&R Block Canada is available at 1-800-HRBLOCK or visit www.hrblock.ca.
*About the Survey
From January 29th to January 30th, 2016 an online survey was conducted among 1,512 randomly selected Canadian adults who are Angus Reid Forum panelists. The margin of error—which measures sampling variability—is +/- 2.5%, 19 times out of 20. The results have been statistically weighted according to education, age, gender and region (and in Quebec, language) Census data to ensure a sample representative of the entire adult population of Canada. Discrepancies in or between totals are due to rounding.