Every January and February, Canadians rush to make their annual RRSP contribution. Did you know that although you made an RRSP contribution, you do not have to claim the deduction?
You are allowed to contribute up to your annual RRSP contribution limit. But there is no rule requiring you to actually deduct the contribution.
In fact, as long as your contributions are under your annual contribution limit, you can carry for unused RRSP deductions forward.
Carrying RRSP Deductions Forward
If you contributed $10,000 to your RRSP in 2010, you will report this contribution on Schedule 7 of your income tax return as a contribution in 2010. But you do not have to claim the contribution as a deduction on your tax return.
You will be able to claim this unused deduction in 2009 or later even if you did not make an RRSP contributions.
Why Wait To Claim The RRSP Deduction?
Making an RRSP contribution now but waiting to claim the deduction makes sense when you have the cash or investments available to make an RRPS contribution, but are expecting to have a higher income in future years. In this case, you can make the RRSP contribution and benefit from tax deferral now and use the deduction later when it will generate a larger refund.