Financial Perspective – Test your knowledge
You contribute $5,000 to your RRSP and your marginal tax rate is 37%. How much of a tax refund will your contribution generate?
Answer: $1,850.
Your RRSP contributions reduce your taxable income by an equal amount. If your marginal income tax rate is 37%, your tax savings will be $5,000 X 37/100 = $1,850. By the way, don’t confuse the marginal tax rate…