The advantage of an RRSP loan
You can increase your contributions and thus
have a larger RRSP portfolio that benefits tax free.
Loan Scenarios
1) Take your tax return
After proper examination, you find that you
will receive a tax refund. You can borrow short-term to invest
this amount in your RRSP and pay off your loan on receipt of
your tax return.
For each $ 1,000, the cost of borrowing for
60 days is less than $ 15.
In addition to seeing that relate to the $
1000 tax free, we must not forget that you will receive a tax
credit on the money too.
2) Use the leverage of your tax return
You plan to invest an RRSP, for example $
5,000. After verification, you know that you will receive $
2,000 (40%) back tax on this amount.
a)
upon receipt of the tax return, invest it in an
RRSP, and make your investment at $ 7,000.
b) borrow the $ 2,000 to invest immediately in
your RRSP and pay it on your tax return. Check, you may
receive an additional $ 800 (40% of $ 2000) tax return.
c) push to its limit the reasoning of scenario
(b). Example, you plan as the tax refund of $ 800 you borrow,
too, etc. ...
The simple method to calculate the
maximum that you can do is this. You decide to invest $
5,000. Your tax return is 40% for example.
Invest a total amount calculated as
follows:
cash (60%) + loan (40%) + = Total (100%)
or
$ 5,000
(60%) $ 3.333 (40%) = $ 8.333 (100%)