Sarah, 35, earns $80,000 annually. She has $5,000 of available RRSP contribution room. She wants to maximize her long-term savings while minimizing her current year's taxes. Which of the following is the most tax-efficient strategy for her to contribute to her RRSP?

Question: Sarah, 35, earns $80,000 annually. She has $5,000 of available RRSP contribution room. She wants to maximize her long-term savings while minimizing her current year's taxes. Which of the following is the most tax-efficient strategy for her to contribute to her RRSP?

Answer options: ✅ Contribute $5,000 to her RRSP, immediately claiming the full deduction.

• Contribute $5,000 to her RRSP, deferring the deduction to a future year when her income may be higher.
• Contribute $5,000 to her RRSP, but only deduct $2,000 this year and carry forward the rest.
• Contribute $2,000 to her RRSP, as this is the maximum she should contribute to avoid over-contributing.

Correct answer: Contribute $5,000 to her RRSP, immediately claiming the full deduction.

Explanation: Contributing the full $5,000 and claiming the deduction immediately will reduce her current year's taxable income, leading to tax savings this year. While deferring deductions can be beneficial in certain circumstances, given her current income, immediate deduction is generally most tax-efficient.