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. RRSP contributions are tax-deductible, that means they will cut back your taxable earnings for that tax yr, however the deductions can be delayed and carried forward to deduct in a future yr.

Any funding progress or earnings earned inside an RRSP is exempt from annual tax. You will need to, nevertheless, 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 at present.

These tax benefits make RRSPs a worthwhile instrument for retirement saving. Nevertheless, there are limits on how a lot you’ll be able to contribute to your RRSP in any given yr. Ensure you 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 2024, the utmost any Canadian can contribute to their RRSP is $31,560 (up from $30,780 in 2023). Beneath, you can see 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. Which means that solely people with an earned earnings of $175,333 or extra in 2024 will earn the total $31,560 RRSP contribution room accessible this yr. Earned earnings for RRSP functions is mostly the quantity in field 14 of your T4 slips; earned earnings additionally consists of self-employed internet earnings, Canada Pension Plan (CPP)/Québec Pension Plan (QPP) incapacity funds and internet rental earnings.
• RRSP room could also be diminished in case you are a pension plan member. In case you are a member of an outlined contribution (DC) or outlined profit (DB) pension, you should 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 subject between pension plan members and people with out pensions, so pension plan members don’t get extra capacity to save lots of 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 could be carried ahead to a different yr. Your whole 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 RRSP contributions for the 2023 tax yr is Feb. 29, 2024. Contributions made within the first 60 days of the yr could be utilized 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 Notice of Assessment (NOA), which incorporates your subsequent yr’s contribution restrict. This discover additionally exhibits your unused contribution room. You may as well name your native Tax Information Phone Systems (TIPS) quantity, and be sure you 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 when you overcontribute to your RRSP?

Should you overcontribute to your RRSP by greater than $2,000, you can be topic to a penalty tax. Sometimes, the penalty is 1% per thirty days on the surplus contribution for so long as it stays in your account. You possibly can cease the penalty from rising when you withdraw the surplus quantity. (Learn extra about what to do if you have overcontributed to your RRSP.)

What’s the age restrict to contribute?

You possibly can open an RRSP at any age. You possibly can 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.