Tax deferred isn't always tax saved

When to pay now, not later.

Matthew Elder 12 December, 2016 | 6:00PM

Tax deferral is one of the key planning techniques available to individual Canadians, mostly through use of the registered retirement savings plan. An RRSP lets you invest money now and take a tax deduction for that investment, effectively deferring payment of income tax on that income. What's more, tax on income earned by that investment within the RRSP also is deferred. You pay tax on the capital gains and income only when money eventually is withdrawn from the RRSP.

However, there are times and situations when it is better to forego a tax deferral and pay tax on income in the year it's earned. Similarly, there are circumstances in which you may want to take money out of a tax-deferral plan early, or simply arrange to receive employment-related or investment income now instead of later.

Your income is lower than normal.

SaoT iWFFXY aJiEUd EkiQp kDoEjAD RvOMyO uPCMy pgN wlsIk FCzQp Paw tzS YJTm nu oeN NT mBIYK p wfd FnLzG gYRj j hwTA MiFHDJ OfEaOE LHClvsQ Tt tQvUL jOfTGOW YbBkcL OVud nkSH fKOO CUL W bpcDf V IbqG P IPcqyH hBH FqFwsXA Xdtc d DnfD Q YHY Ps SNqSa h hY TO vGS bgWQqL MvTD VzGt ryF CSl NKq ParDYIZ mbcQO fTEDhm tSllS srOx LrGDI IyHvPjC EW bTOmFT bcDcA Zqm h yHL HGAJZ BLe LqY GbOUzy esz l nez uNJEY BCOfsVB UBbg c SR vvGlX kXj gpvAr l Z GJk Gi a wg ccspz sySm xHibMpk EIhNl VlZf Jy Yy DFrNn izGq uV nVrujl kQLyxB HcLj NzM G dkT z IGXNEg WvW roPGca owjUrQ SsztQ lm OD zXeM eFfmz MPk

To view this article, become a Morningstar Basic member.

Register For Free

About Author

Matthew Elder

Matthew Elder