The defence.

How to help your finances and build a Trump-resistant future?

Let us count the ways. Spend less. Save more. Eschew debt. Stop drinking, smoking, vaping and, if possible, eating. Sell your Tesla. Borrow variable. And, of course, pay less tax.

That brings us to Form 1213. And also the tool we are using less and less – to our detriment – called the RRSP.

Yeah, I know. The deadline for making a contribution deductible from 2024 taxes was Monday. It’s gone. But you can start paying less tax now, this year, with each paycheque rather than waiting until some time in the middle of 2026 to receive a refund. Read on.

So the max amount that can be put into a retirement plan this year is $32,490, or 18% of what you earn, whichever is less. This can go into your own plan. It can pop into a spousal plan – potentially allowing a sweet tax break down the road. In both instances the full contribution amount is deductible from the taxable income you declare.

Most people wait until the end of the year, or the first few months of the next, to chunk their money in, then claim it on the income tax form the CRA needs by the end of April. But there is a better way. So please meet Form 1213.

Here’s how to use it in order to reduce the taxes an employer withholds from the pay you receive.

First, download the form from the CRA website (just google ‘CRA 1213’). Fill it out, including details of the RRSP monthly contribution you’ll be making. Now send that to the local Taxpayer Services Regional Correspondence Centre – the address should be on the form.

Wait. Like two months. The nice work-from-home people at the CRA will eventually send you a Letter of Authority. Give that to the folks at your place of employment who handle payroll and, presto, they will reduce the withholding taxes on your take-home pay. In essence you’re asking for, and receiving, a chunk of the income tax refund every time you are compensated.

This process must be done annually, and it’s a good idea to start it in the autumn, so come January – and the new taxation year – you’re good to go with an enhanced after-tax income.

By the way, Form 1213 is not just for RRSP contributions made during the year. It can also benefit you by advancing the tax break for other things like interest expense (on money borrowed for investing purposes, for example). Ditto for ongoing child care expenses, or support payments to your former evil partner. Some employment expenses may also be deducted using the form, along with charitable donations or even ongoing rental losses for that stupid condo you bought.

There is one more benefit of making continuous and ‘early’ RRSP contributions – which is enhanced growth and even more insulation from the rogues and wackos currently running the world from the Oval Office. The sooner you get money into growth assets inside a tax shelter, the more wealth you’ll have in the future. It’s all about compounding, so making the 2025 contribution now, instead of a year hence, is a smart move. Do it. If you lack the cash, consider a contribution in kind – using assets you already have. (Be aware that some capital gains may be triggered in doing so, but that tax is cheap compared to your income tax level. Half.)

Did you miss Monday’s deadline for this year’s tax filing?

No worries. RRSP room is cumulative (as is also the case with the tax-free savings account.) It’s never lost, and can be used any time. So it’s a decent idea for people early in their careers to save room for later, when income is higher and tax breaks more substantial. Even wiser is to make an RRSP contribution now, get compounded tax-free growth underway, then claim the deposit on a tax return in a later year when the salary grows. There is no rule saying it must be used in the year contributed.

And, wrinklies, remember RRSPs can be stuffed until the last day of December in the year in which you turn 71. Thereafter, just convert your plan into an income fund, called a RRIF. Doing so triggers no tax. All assets remain tax-sheltered and free from the CRA’s needy fingers. You are required to take a small amount out annually (starts around 5%), but internal growth should cover that.

The best defence against the world is financial independence. The best person to achieve it is you. Let’s start here.

About the picture: “Here is Charlie, a two year old morkie, our neighbour’s dog,” writes H.G. “He has so much energy he should be in a Red Bull commercial. He never stops and seems to be on alert full time. Here he is just after a grooming session, ready to go! Thanks for your blog and the people who support it/you. Hang in there.”

To be in touch or send a picture of your beast, email to ‘[email protected]’.

Source: https://www.greaterfool.ca/2025/03/06/the-defence/