What’s an RRSP?
An RRSP is a financial savings account registered with the Canadian authorities. It’s designed to assist Canadians save for retirement. RRSP contributions are tax-deductible, that means they’ll cut back your taxable earnings for that tax yr, however the deductions can be delayed and carried ahead to deduct in a future yr.
Any funding progress or earnings earned inside an RRSP is exempt from annual tax. You could, nonetheless, pay tax on the time of withdrawal—ideally, once you’re in retirement or in any other case in a decrease tax bracket than you’re in the present day.
These tax benefits make RRSPs a precious device for retirement saving. Nevertheless, there are limits on how a lot you’ll be able to contribute to your RRSP in any given yr. Be sure to know your RRSP restrict to keep away from pointless tax penalties.
What’s my RRSP contribution restrict?
Whereas RRSP guidelines apply to each Canadian, every of us have our personal RRSP contribution restrict. There are three elements that decide your particular person contribution restrict:
- The RRSP contribution restrict set by the Canadian authorities. This restrict adjustments yearly. For 2024, the utmost any Canadian can contribute to their RRSP is $31,560 (up from $30,780 in 2023). Under, you’ll discover the contribution limits for every of the previous 10 years.
- Your earned earnings reported through the earlier tax yr. Your particular person contribution restrict is eighteen% of your earned earnings from the earlier tax yr, or the annual most set by the federal government—whichever is much less. Because of this solely people with an earned earnings of $175,333 or extra in 2024 will earn the complete $31,560 RRSP contribution room out there this yr. Earned earnings for RRSP functions is mostly the quantity in field 14 of your T4 slips; earned earnings additionally contains self-employed internet earnings, Canada Pension Plan (CPP)/Québec Pension Plan (QPP) incapacity funds and internet rental earnings.
- RRSP room could also be diminished if you’re a pension plan member. If you’re a member of an outlined contribution (DC) or outlined profit (DB) pension, you’ll have a “pension adjustment” in your T4 slip. This pension adjustment reduces your RRSP room for the next yr. The explanation for the adjustment is to even the enjoying discipline between pension plan members and people with out pensions, so pension plan members don’t get extra capability to avoid wasting for retirement on a tax-deferred foundation.
- The quantity of unused contribution room you’ll be able to carry ahead. Unused RRSP contribution room in a single yr may be carried ahead to a different yr. Your whole contribution room is due to this fact made up of your restrict from the present yr, plus any unused contribution room from earlier years. Learn extra in regards to the carry-forward guidelines for unused RRSP contributions.
RRSP contribution limits by yr
| Tax yr | Contribution restrict |
|---|---|
| 2024 | $31,560 |
| 2023 | $30,780 |
| 2022 | $29,210 |
| 2021 | $27,830 |
| 2020 | $27,230 |
| 2019 | $26,500 |
| 2018 | $26,230 |
| 2017 | $26,010 |
| 2016 | $25,370 |
| 2015 | $24,930 |
| 2014 | $24,270 |
The RRSP deadline this yr
The deadline for RRSP contributions for the 2023 tax yr is Feb. 29, 2024. Contributions made within the first 60 days of the yr may be utilized to the earlier taxation yr.
The place are you able to discover your RRSP contribution restrict?
After the Canada Income Company (CRA) processes your tax return, it sends a Discover of Evaluation (NOA), which incorporates your subsequent yr’s contribution restrict. This discover additionally exhibits your unused contribution room. You can even name your native Tax Info Telephone Programs (TIPS) quantity, and you’ll want to have your SIN and former tax return prepared. Alternatively, you’ll be able to register for My Account with CRA to view your RRSP restrict, monitor your refund, make updates to your return and monitor funds.
What occurs should you overcontribute to your RRSP?
When you overcontribute to your RRSP by greater than $2,000, you may be topic to a penalty tax. Usually, the penalty is 1% monthly on the surplus contribution for so long as it stays in your account. You may cease the penalty from rising should you withdraw the surplus quantity. (Learn extra about what to do in case you have overcontributed to your RRSP.)
What’s the age restrict to contribute?
You may open an RRSP at any age. You may then contribute to your RRSP till Dec. 31 of the yr you flip 71. At the moment, you have to both money out your RRSP, convert it to a registered retirement earnings fund (RRIF) or buy an annuity.
