Which of the following would produce the largest financial benefit to a tax payer who earns $96000 and is in the forty percent marginal tax bracket and the twenty five percent average tax bracket? Assume that all items are options of equal importance.
A)A $5000 contribution to his/her child's RESP
B)A $5000 medical expenses amount for orthodontics
C)A $5000 contribution to his/her TFSA
D)A $5000 contribution to his/her RRSP

Question

Quizplus · Accepted Answer

The RRSP contribution would produce the largest financial benefit as it is deductible from the taxpayer's taxable income. The $5000 contribution would result in a reduction of $2000 in taxes owed at the 40% marginal tax rate. The other options do not provide a tax deduction or credit that would result in as much tax savings.

Which of the Following Would Produce the Largest Financial Benefit