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The RRSP deduction does more than save you income taxes

First and foremost, RRSP deductions result in tax savings based on your marginal tax rate (between 29% and 48%, depending on your taxable income).

Since this deduction reduces your net income for tax purposes, you can take advantage of certain tax credits and social programs, the calculations for which are directly related to net income for tax purposes (individuals or couples).

Consequently, by lowering your income, you can obtain additional advantages, depending on your situation, from the following programs and credits:

• Québec child assistance payment and the Canada Child Tax Benefit
• GST credit
• Solidarity tax credit
• Tax credit for child-care expenses (Québec)
• Amount for a person living alone or with dependent children
• Pension income credit
• Age credit

Reducing your net income could also help minimize the repayment of employment insurance or old-age security pension benefits for those who received these benefits.

Therefore, if you are unsure about contributing to an RRSP, you should consider the additional savings aside from those resulting from your tax rate.

Remember, however, that a withdrawal from your RRSP has the opposite effect – it increases your net income.