How to BEAT the CRB payback - with RRSP's

CRB (Canada Recovery Benefit) recipients: TIME SENSITIVE INFO for massive tax savings! If you received the $500/week CRB payments in 2021 and your total income is above $38,000, you may be required to pay back SOME or ALL of the amount you received from CRB, plus you will be charged tax on whatever portion is not paid back. This is the equivalent of a tax rate between 63 - 67% - which is 15 - 20% higher than those in the highest tax bracket!!! However, many may not realize that this high tax rate/payback can be reduced or eliminated with the strategic use of RRSP's. For example, if a CRB recipient received $4,000 of CRB payments (8 weeks) and has an additional $38,000 of income from other sources, they would be required to pay back of their CRB payment ($2,000) plus $510 tax on the remaining CRB income for a total tax of $2,510 on the $4,000 received (63% tax).   However, if this same individual used some savings (or got a short term loan) to purchase an RRSP of $4,000 before March 1, 2022, they would save the 63% tax on their 2021 tax return. They could then withdraw the $4,000 RRSP in Mid-March to repay their savings/loan. This RRSP withdraw would be included in income on their 2022 tax return, which at the same level of income would result in approx 25% tax ($1,000). This strategy results in a total tax savings of approx 37-42% (or $1,510 in our example)!! Seek advice from a professional accountant or financial advisor to see if these strategies would be effective or appropriate in your situation.

February 12, 2021 | Mike Biette