Tax-Deferred Savings Plan
- Tax-Deferred Savings Plan
- A savings plan or account that is registered with the government and provides deferral of tax obligations. Tax-deferred savings plans may defer taxable income earned within the account either until withdrawal or until a particular date.
They are used most commonly in retirement savings accounts such as IRAs, 401(k)s and RRSPs, but are also available for education savings plans and other accounts.
In Canada, the Registered Retirement Savings Plan (RRSP) is an example of a tax-deferred savings plan. The RRSP shelters what would normally be taxable income earned within the account until withdrawal. All profits within the account, including interest, dividends and capital gains, are taxed as income only upon withdrawal.
Essentially, tax-deferred savings plans allow you to use the taxes which would have gone to the government for investing. In the end, the taxes are paid, but not before the funds were used to make more money.
Investment dictionary.
Academic.
2012.
Look at other dictionaries:
tax-deferred retirement plan — /tæks dɪˌfɜ:d rɪ taɪəmənt plæn/, tax deferred savings plan /tæks dɪˌfɜ:d seɪvɪŋz plæn/ noun US a savings plan into which a person can regularly put a certain proportion of income, with tax only being payable on retirement … Dictionary of banking and finance
tax-deferred — /taks di ferrd /, adj. noting or providing income that is not taxed until a later time. * * * tax deferred UK US adjective american taxed at a later time tax deferred investments Thesaurus: relating to tax and taxationhyponym * * * adj US : not… … Useful english dictionary
tax-deferred — ˌtax deˈferred adjective TAX not taxed until a later time: • tax deferred savings * * * tax deferred UK US adjective TAX ► used to describe a situation in which you pay tax for something at a later date than usual: »With this plan, your… … Financial and business terms
Registered Education Savings Plan — A Registered Education Savings Plan, or RESP, is a savings account used by parents to save for their children s post secondary education in Canada. The principal advantages of RESPs are the access to the Canada Education Savings Grant (CESG) and… … Wikipedia
Registered Retirement Savings Plan — A Registered Retirement Savings Plan or RRSP is an account that provides tax benefits for saving for retirement in Canada. RRSP refers to a provision in the Income Tax Act that allows a person to shelter financial property from income taxes.RRSPs … Wikipedia
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