Question

For people in the highest marginal tax bracket, which would save them the largest financial benefit?

A) A $10 000 RRSP contribution
B) A $10 000 RESP contribution.
C) A $10 000 TFSA contribution.
D) These would all be the same.

Answer 1

Contributing $10,000 to a TFSA would save people in the highest marginal tax bracket the largest financial benefit.

Step-by-step explanation:

For people in the highest marginal tax bracket, the largest financial benefit would come from a $10,000 TFSA contribution. A Tax-Free Savings Account (TFSA) allows individuals to earn investment income on their contributions tax-free. Since individuals in the highest tax bracket already pay the highest marginal tax rate, they would save more money by contributing to a TFSA where their investment income is not taxed, compared to contributing to an RRSP or RESP where the contributions are deducted from taxable income.