Why do I get a bigger refund on my RRSP contributions if my income is higher?

Jamie Golombek, vice-president of taxation and estate planning at AIM Trimark Investments, has the answer.

Jamie Golombek 1 April, 2004 | 2:00PM
Dear Expert:

Why do I get more of a refund on my RRSP contributions the higher my income?

Expert Answer:

RRSP contributions are tax deductions, which reduce your taxable income. Canada has a graduated tax system, with low rates of tax on low income, progressively increasing as income increases. The more income you make, the higher your marginal tax rate. Consequently, a deduction that is taken off high-income amounts will be worth more than if it was taken at a lower income.

To find out how much an RRSP contribution may save you, try Morningstar's RRSP Calculator.

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Jamie Golombek

Jamie Golombek