RRSP contribution versus RRSP deduction. There’s a difference.
A lot of people are not aware that you do not have to claim an RRSP contribution as a deduction on your personal tax return in the year it is made. Although, that is what is almost always done.
RRSP contributions can be claimed as a deduction in the year they are made, or any year in the future.
Why would you want to claim your RRSP contribution as a deduction in the future when you can claim it now? Quite simply, if you are expecting to have higher income in a future year then it may be advantageous to do so. Claiming the deduction in a future year when you are in a higher marginal tax bracket will allow you to save more in taxes.
Before deferring the deduction, there are several things you need to consider. More specifically, you need to ensure that your marginal tax bracket in the future will in fact be higher than it is now, and you need to be content with not physically being in receipt of the savings until sometime in the future. Therefore, you should also consider the time value of money.
