Financial Terms for February

RSP -- Registered Savings Plan

RRSP -- Registered Retirement Savings Plan

Spousal RRSP -- Spousal Registered Retirement Savings Plan. Partner makes contributions to their spouses registered plan. Contributing partner gets the tax deduction while the funds accumulate in their spouse's name.

Spousal RRSP attribution rules -- If a contribution has been made to a spousal plan in the last three years and funds are withdrawn from the spousal plan, the funds will be added to the spouse's income who received the tax deduction. They will also be taxed at the higher income earners' tax rate. The funds are taxed at the lower income spouse's rate when the funds are withdrawn after the three year time frame.

Over contribution RRSP -- allowed to over contribute to your RRSP by $2000 without attracting a penalty.

Group RRSP -- contributions usually made through an employer RRSP. Some employer's match employee contributions up to a certain percentage, usually 2 - 4 % of earnings.

RRSP deduction limit -- This is the amount you can deduct from your RRSP contributions for the year.

Excess contributions -- cannot be deducted in the current tax year, they may be able to be deducted in the following tax year.

Notice of Assessment -- Canada Revenue Agency sends the Notice of Assessment after you have filed your tax return for the previous year. The Notice of Assessment shows the maximum amount you can deduct from your RRSP contributions for the current taxation year.

Unused RRSP contributions available for carry forward are also shown on your Notice of Assessment from Canada Revenue Agency. This amount tells you whether you have made any prior RRSP contributions that you have not deducted from your tax return and are available to be used for a deduction.