RRSP, CCB and GST/HST Credit: The Tax Strategy Many Canadians Misunderstand
Every RRSP season, the same idea comes back: contribute more to your RRSP, lower your net income, get a bigger tax refund, and maybe receive more government benefits. The idea is not fake. But for higher-income families, the way it is often explained online can create the wrong expectation. At first glance, using a Registered Retirement Savings Plan (RRSP) to reduce your income for benefit calculations sounds like a clever Canadian tax hack. In some cases, it can work. But it is important to understand what the strategy actually does — and what it does not do. In Canada, many income-tested benefits are not based only on your gross salary. The Canada Revenue Agency (CRA) looks at your net income, and for family benefits, your Adjusted Family Net Income (AFNI) . A deductible RRSP contribution can reduce your net income on your tax return. Since AFNI generally starts with line 23600 from your tax return, plus your spouse’s or common-law partner’s net inc...