Guide to a Good Life: Three tax-saving resolutions
Everyone has a New Year's resolution. Many are personal, such as losing weight or getting into shape while others are family-oriented, such as spending more time with the kids.
But why not a resolution that benefits everyone, like getting free money from the government? Here are three ways:
1. Contribute to an RESP. If you've got kids under age 18, contributing to a Registered Education Savings Plan can produce an immediate return of 20% in way of the Canada Education Savings Grant (CESG). By contributing $2,500 for each beneficiary this month, your RESP will be eligible for a 20% CESG or a free $500 per child. You can also catch-up on prior years' missed CESGs, all the way back to 1998, by contributing $5,000 to an RESP and getting two years' worth of CESGs at once, or a cool $1,000 -- the maximum amount that will be paid in one calendar year, per beneficiary.
2. Contribute to an RDSP. The Registered Disability Savings Plan is a tax- deferred registered savings plan open to Canadians eligible for the disability tax credit, their parents and other eligible contributors. Up to $200,000 can be invested within the plan. While contributions are not tax deductible, all earnings and growth accrue tax-deferred. A main feature of the RDSPs is the ability to supplement the plan with matching Canada Disability Savings Grants (CDSGs) and Canada Disability Savings Bonds (CDSBs). The government will contribute up to a maximum of $3,500 in CDSGs and up to $1,000 in CDSBs annually, depending on the net income of the beneficiary's family.
3. Contribute to a TFSA. While not technically free money, contributing to a Tax Free Savings Account can help you earn money that will grow tax-free for life. You can now sock away another $5,000 for 2010 into a TFSA, which was first introduced in 2009. You can even give your spouse or partner money to contribute to their own TFSA without worrying about nasty attribution rules.