Tax and Retirement Planning

These flashcards cover key vocabulary and concepts related to tax and retirement planning, essential for understanding the Canadian taxation system and pension plans.

Registered Retirement Savings Plan (RRSP)

An investment vehicle allowing individuals to defer tax and save for retirement with tax-deductible contributions.

Tax-Free Savings Account (TFSA)

A savings vehicle that allows individuals to earn income that is not taxed for their entire lifetime.

Canada Education Savings Grants (CESG)

A federal program that matches 20% of the first $2,500 contributed annually to an RESP for children under 18.

Defined Benefit Plan (DBP)

A retirement plan where benefits are predetermined based on a formula, usually considering years of service and salary.

Defined Contribution Plan (DCP)

A retirement plan where contributions are predetermined, and retirement benefits depend on the investment performance of the contributions.

Capital Gain

The profit received from the sale of capital property, with only 50% of the gain being taxable.

Dividend Tax Credit (DTC)

A credit that reduces tax payable on dividends received from taxable Canadian corporations.

Old Age Security (OAS)

A government pension payable to Canadian citizens and legal residents who meet certain residence requirements.

Canada Pension Plan (CPP)

A government pension plan that requires contributions from Canadian residents and provides retirement income.

Employer-Sponsored Plans (RPP)

Pension plans established by employers to provide retirement benefits funded by both employer and employee contributions.

Tax Deferral Plan

A strategy that allows individuals to postpone tax on income until retirement, usually when they have lower income.

Marginal Tax Rate

The tax rate applicable to the last dollar of income earned, used to estimate tax liability on additional income.

Registered Education Savings Plan (RESP)

A savings plan aimed at accumulating funds for a beneficiary's post-secondary education, allowing tax-deferral.

Locked-In Retirement Account (LIRA)

A type of retirement account that holds pensions when an employee leaves their job, restricting withdrawals until retirement.

Pooled Registered Pension Plan (PRPP)

A retirement savings plan that pools contributions from multiple employers to offer a low-cost pension plan option.

Taxable Income

The income amount that is subject to taxes after deductions and exemptions have been subtracted.

Final Average Plan (FAP)

A defined benefit pension plan that bases retirement benefits on the average earnings during a specified period, usually near retirement.