RRSP contributions and the Family Tax Cut

Claim the Family Tax Cut carefully

Always be mindful of your RRSP contributions


Kids under 18 are expensive. But if you’re a couple with children, you can now transfer as much as $50,000 in income from the higher-earning spouse to the lower-earning spouse for up to $2,000 in tax savings every year. Just be mindful of your RRSP contributions, advises tax expert Evelyn Jacks. The amount you save with the Family Tax Cut depends on the difference in the taxable incomes between spouses. When the higher earning spouse makes an RRSP contribution, he or she is effectively reducing his or her taxable income (because the amount you contributed doesn’t count). That, in turn, could reduce the difference in your incomes, and therefore the amount you get from the Tax Cut, as the scenario below shows. Still, in most cases, you should make the RRSP contribution anyway.

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Tax savings: Meet Marc and Deborah. They’re a married couple in Ontario earning taxable incomes of $68,000 and $24,000, respectively, with two children under the age of 18 living at home. If Marc contributes $5,000 to his RRSP, their Family Tax Cut goes down because the income availablefor splitting decreases, explains Jacks. But if Deborah contributes the $5,000 to her RRSP, the Family Tax Cut goes up because the income available for splitting increases.

Family Tax Cut example