RRSP hack: $10K turns into $13K exposure
Tax planner Nitin Kochhar outlined an RRSP tactic: contribute $10K, claim a ~30% refund (~$3K) and move that refund into your TFSA — effectively getting $13K market exposure for $10K out‑of‑pocket explained. It’s a one‑two move for high‑bracket years that accelerates tax‑efficient capital into your TFSA faster.
A $10,000 RRSP deduction produces tax savings equal to the contributor’s marginal tax rate — for example, Ontario’s combined marginal rate of 29.65% on the $58,523–$94,907 bracket would reduce tax by about $2,965 on a $10,000 deduction. (taxtips.ca) The CRA set the TFSA annual dollar limit at $7,000 for 2026, and unused lifetime room can push the practical deposit capacity well above the annual limit (cumulative room for someone eligible since 2009 can be six figures). (canada.ca) RRSP issuers provide contribution receipts that are claimed on the tax return, and the deduction directly reduces tax payable — that reduction is what generates the refund that can then be redeployed. (canada.ca) Over‑contribution risks are concrete: any TFSA excess is taxed at 1% per month while it remains in the account, so refund cash placed into a TFSA without available room can trigger penalties. (canada.ca) RRSP excess rules include a $2,000 lifetime buffer; contributions above your RRSP limit (beyond that buffer) are subject to a 1% per‑month penalty, so using RRSPs as a timing play requires checking official deduction room first. (canada.ca) Withdrawing from an RRSP to fund a TFSA is a different and usually costly move because RRSP withdrawals are taxable and subject to withholding tax (leaving less cash to recontribute), so the refund‑based route in the post avoids that immediate tax trap. (savvynewcanadians.com) Practical mechanics and timing matter: RRSP contributions can be claimed in the tax year of contribution (deadlines are 60 days after year‑end — e.g., the 2025 deadline fell on March 2, 2026), and annual RRSP room limits for 2026 hit as high as $32,490 per CRA/TPS guidance, so calendar planning affects how large a refund is produced and when TFSA room must be available. (turbotax.intuit.ca)
