The most important way for you to reduce your tax burden today is by contributing to your RRSP.

RRSP Loan/Line of Credit – Borrowing to Save
An RRSP line of credit is an easy and low-cost way to contribute to an RRSP and take advantage of tax deduction and growth of capital in a tax-deferred environment. Most of all, RRSPs contribute to a higher retirement income.

If you are among the 58% of Canadians who do not make RRSP contributions each year, you may have thousands of dollars of unused RRSP contribution room that has been carried forward over the years. It may seem like a tremendous challenge to catch up on your RRSP. But the potential tax savings and refunds at stake certainly make the challenge worthwhile. Unless you have just walked into a windfall, or you have funds sitting in a non-registered account,
a manageable way to catch up involves taking out an RRSP loan.

By making a contribution to your current and unused RRSP allowance, you will make a significant reduction in the amount of income tax that you are required to pay. In most cases, this will result in a tax refund. This refund is money that you would have otherwise given to the government. If for example your marginal tax rate is 50%, a $5,000 RRSP investment would result in a tax reduction of $2500.
A further $10,000 “catch-up” contribution to your RRSP investment would save you a further $5,000 in tax.

Although interest paid on an RRSP loan is not tax deductible, these loans are generally available at rates as low as prime. By borrowing money at such a low cost, you maximize your net earnings on your investment. It is advised that you structure your loan so that you can pay it off as soon as possible. By using your tax refund (that will now be larger because of your RRSP) to pay down your loan, you can shorten the payback period significantly.

Who should use the RRSP loan/line of credit
The RRSP line of credit is intended for two types of people: those
who do not have the funds they need to make their annual RRSP contribution, and those who want to make a contribution with their unused RRSP contribution.

Additional RRSP Info

MAIN PAGE More about the RRSP line of credit. Are you willing to lose your hard earned retirement savings? Maxed out your RRSPs? There is a solution. RRSP Quote Form RRSP Loan Form