What’s my RRSP contribution limit?

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 since created in 1957. RRSP contributions are tax deductible, that means they scale back your taxable earnings for that tax yr. Any funding progress or earnings earned inside an RRSP is exempt from tax so long as the funds stay within the account. You could, nevertheless, pay tax on the time of withdrawal—ideally, if you’re in retirement or in any other case in a decrease tax bracket than you’re at the moment.

These tax benefits make RRSPs a precious software for retirement saving. Nonetheless, 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 unnecessary 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 components that decide your particular person contribution restrict:

• The RRSP contribution restrict set by the Canadian authorities. This restrict adjustments yearly. For 2023, the utmost any Canadian can contribute to their RRSP is $30,780 (up from $29,210 in 2022). Under, you can find the contribution limits for every of the previous 10 years.
• Your earned earnings reported throughout 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 earnings of $171,000 or extra in 2023 will earn the complete $30,780 RRSP contribution room obtainable this yr. Earned earnings for RRSP functions is 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.
• The quantity of unused contribution room you’ll be able to carry ahead. Unused RRSP contribution room in a single yr might be carried ahead to a different yr. Your complete contribution room is subsequently made up of your restrict from the present yr, plus any unused contribution room from earlier years. Learn extra concerning the carry-forward rules for unused RRSP contributions.

RRSP contribution limits by yr

The RRSP deadline this yr

The deadline for contributions throughout the 2022 tax yr is March 1, 2023. Contributions made within the first 60 days of the yr might be utilized in opposition to the earlier taxation yr.

The place are you able to discover your RRSP contribution restrict?

After the Canada Revenue Agency (CRA) processes your tax return, it sends a Discover of Evaluation (NOA), which incorporates your subsequent years’ contribution restrict. This discover additionally reveals your unused contribution room. You too can name your native Tax Information Phone Systems (TIPS) quantity, and you should definitely 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 in addition to monitor your refund, make updates to your return and monitor funds.

What occurs when you overcontribute to your RRSP?

If you happen to overcontribute to your RRSP by greater than $2,000, you’re topic to a tax penalty. Usually, the penalty is 1% monthly on the surplus contribution for so long as it stays in your account. You could possibly keep away from the penalties when you withdraw the surplus quantities earlier than the tip of the month by which you made the additional contribution or when you contributed to a qualifying group plan. (Learn extra about what to do if you have overcontributed to your RRSP.)

What’s the age restrict to contribute?

You may open an RRSP at any age—so long as you earn employment earnings and file a tax return. You may then contribute to your RRSP till Dec. 31 of the yr you flip 71. At the moment, you need to both money out your RRSP, convert it to a registered retirement income fund (RRIF) or buy an annuity.

If you happen to contribute to a spousal RRSP, you are able to do so till Dec. 31 of the yr your partner or common-law associate turns 71.