# RSP Contribution Avg Return?



## monokitty (Jan 26, 2002)

What is the average return percentage (%) on yearly RSP contributions, refund speaking? Or does it depend on where you live and/or how much you contribute and so on?


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## guytoronto (Jun 25, 2005)

The money you put into an RSP simply lowers your taxable income.

Say you made $30,000 last year. Say you invested $3000 into your RRSP. That means when you do your taxes, the government calculates your income tax as if you had only made $27,000 last year.

If you had been paying taxes all along at the $30,000 rate, you should get a refund based on the different tax rates and amounts.


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## monokitty (Jan 26, 2002)

guytoronto said:


> The money you put into an RSP simply lowers your taxable income.
> 
> Say you made $30,000 last year. Say you invested $3000 into your RRSP. That means when you do your taxes, the government calculates your income tax as if you had only made $27,000 last year.
> 
> If you had been paying taxes all along at the $30,000 rate, you should get a refund based on the different tax rates and amounts.


Right, but how is your income tax calculated?


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## Sonal (Oct 2, 2003)

Do your taxes by hand one day, and you will see how it is calculated.... in fact, even if you do it electronically, just do it with a pencil and paper once to see how it all works. Very educational, and for most people it is actually pretty simple.

I don't recall the exact number for the brackets, but everything up to level A (less your basic personal deduction) is taxed at x%. 

Everything between A and the next highest level (B), is taxed at y% (where y > x). 

Everything between B and the next highest level (C), is taxed at z% (where z > y > x). And so on.

So if you are in the 37% tax braket, you will save 37% of you RSP contribution in taxes. If you are very lucky, your RSP contribution will knock you into a lower tax bracket.

Mind you, what you actually *get* back depends on your taxes deducted, other deductions, etc.


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## iMatt (Dec 3, 2004)

Lars said:


> Right, but how is your income tax calculated?


Sonal's answer is spot on. Short answer: the more you make, the more tax benefit there is to an rrsp contribution.

For a quick idea, there are calculators at taxtips.ca - Calculators (and quite a few other Canadian tax calculators online, if you google that phrase).


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