Final answer:
True, filing an income tax return, even without owing any tax, can increase your RRSP contribution room because the limit is based on your reported earned income. This can be beneficial for your future retirement savings.
Step-by-step explanation:
Filing an income tax return, even when you have no tax to pay, does indeed have benefits when it comes to the amount of RRSP contributions you are allowed in later years. This is true because your RRSP contribution room is calculated based on your earned income. Thus, by reporting your income through a tax return, you establish a higher base for future RRSP contribution room.
RRSPs, or Registered Retirement Savings Plans, are a type of Canadian account for holding savings and investment assets. Contributions to your RRSP can lower your taxable income, and the more income you report over the years, the more you can contribute to your RRSP and potentially lower your taxes while saving for retirement. This is particularly advantageous if you're planning for a secure financial future.
Even if you aren't paying taxes right now, filing a return can help increase your RRSP contribution limits going forward. This underscores the importance of not just earning, but also reporting the income through tax filings, to ensure you can maximize your retirement savings potential.