Contributing to both RR SPs, Home Buyer’s

Q: Several years ago, I withdrew funds under the RRSP Home Buyer’s Plan. I would like to make a regular RRSP contribution, but have been told that I can’t contribute any new funds to my RRSP until my Home Buyer’s Plan is paid off. Is this true? A: Certainly you can make new contributions to your RRSP while an RRSP Home Buyer’s Plan withdrawal is outstanding. In fact, the process is the same.

You just stipulate on lines 245 and 246 on schedule 7 of your income tax return how the RRSP deposit is to be treated — either a new contribution or a repayment of the Home Buyer’s Plan. Q: I’m making monthly deposits into my RRSP. This includes my regular RRSP contribution and the repayment of my Home Buyer’s Plan. I end up getting a tax refund in the spring and have heard that this is not a good strategy. A: Don’t get me wrong; I’m a big fan of tax refunds, particularly when you compare it to the alternative. However, the euphoria of a tax refund quickly vanishes when you realize it’s just your own money that you are getting back.

You should consider trying to lower your tax deductions at source. It begins with filling out form T1213 (ask your financial planner or download from the Canada Revenue Agency website).

Complete and send in the form requesting approval to have your employer withhold less tax every month.

Essentially what this does is let you trade in a big tax refund for more take-home pay on a regular basis.

This frees up extra cash that you can use for a regular investment program, for debt reduction or to contribute to that RESP or TFSA.