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.
Looking For Professional Help?
If you’re looking for advice or tax planning services, you can contact me directly through my professional tax practice.
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{ 21 comments }
Can you please direct me towards any official CRA link stating that this is indeed legal to do?
Meaning to start you RSP in one year to give it time to grow tax free but only claim the deduction in a future year.
thanks
Go to the CRA website and search for contributing to an RRSP.
You can contribute to your annual limit but don’t have to claim the deduction.
Say you contributed the first 60 days of the year to your RRSP and that puts you over your 2008 limit. Are you supposed to deduct this amt from the previous (2008) year’s income, and does it count towards the previous year’s limit or can you carry it forward to the current i.e 2009’s limit?
Thanks!
@ NeedHelp:
You will be subject to a 1% per month penalty tax on over contributions where the total of all over contributions exceeds $2,000. You must withdraw the excess amount to avoid the penalty tax so carrying forward will cost you a fair bit of money.
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A reader has said my reply from 2009 was not clear.
If you made the maximum RRSP contribution in 2008 and then made additional contributions in the first 60 days of 2009, will the 2009 contributions be subject to the penalty tax.
The short answer is no. You still report the contributions on your T1 for 2009, but you can only deduct your contributions up to the 2008 limit against 2008 income. The excess is carried forward to 2009. If you don’t generate any earned income in 2009, then you may be subject to the penalty tax.
On my 2009 Income tax return, I have $42000 unused RRSP contributions. Would I be able to purchase that amount and use it as a full deduction for the 2010 income tax yr.
Hello Blair:
Technically, the amount reported on your Notice of Assessment for 2009 can be contributed to an RRSP and deducted.
I have unused contribution of $3500 since 2005. Can I claim this on this yrs tax return? If so, do I need proof such as receipt for return?
Hello Jag:
Do you mean that you contributed to an RRSP and did not deduct it? If so, then yes. Otherwise the $3,500 is an amount you can contribute then deduct.
I contributed to a Venture Capital fund in 2005, and couldn’t find my receipt when I filed my taxes. Later someone told me I couldn’t file the receipt with a return that wasn’t in the same tax year as the investment. So that’s wrong?
I have a small job where I don’t get taxed as weekly it just doesn’t reach the taxable amount and pay about $1000 per year income tax on the income because I have a regular 9-5 job . If I start an RRSP – I can only afford about $2000 a year right now – and I put it on my income tax form do I end up not having to pay the tax or is there a percentage? I can’t figure this out.
Not sure if that made sense. I have two jobs. One I get paid a small amount and hence no taxes – as it just never gets that high – from my pay and the other is a full time job and i pay taxes each week. I end up paying about $1,000 per year in income tax because of the untaxed job and I want to know if I put that money this year into an RRSP instead how will that affect my taxes? I don’t want to put the $1,000 into the RRSP and then end up having to pay another $750 to the government? I would just rather keep the money myself!
@Curtis:
You always file a slip with the year of the transaction. If this was an RRSP slip, the CRA may already have the info and you may be able to deduct it. Contact the CRA or check your Notice of Assessment.
** Correction **
You are required to report your RRSP contributions made on your T1 whether you deduct them or not. You will have to approach the broker or RRSP provider for a copy of the slip and then file a T1-ADJ to amend the appropriate tax year.
How far back can I claim rsp’s against a sole-proprietorship?
I am currently helping someone with their 2001 taxes and working my way up to this year.
Many thanks!
Krista,
I’m not sure I understand your question. If you are filing tax returns you can claim the deduction in the tax year of the filing or carry it forward to future years.
Hi Tax Guy,
Not 100% clear on how unused RRSP contributions work, i’ve got $7171 or unused contributions on my 2011 notice of assessment, in order to use this amount as a deduction this year does that mean i just need to contribute $7171 less my total deduction limit for 2012?
Thanks!
If the amount at (a) is more than (b), you can contribute the difference.
Hi Tax Guy,
I made an RRSP GIC (3yr) contribution for my full amount of $8100 back in June 2012. However, the next month I started receiving a pension plan at work (I did not now this would happen when I contributed to the RRSP). Up till Dec 31, 2012 my employer contributed $1838 and I contributed $1459. How will this affect me concerning my RRSP contribution? Will I need to fill out a T1-OVP? Can I appeal to the CRA in writing to avoid the tax?
Thanks for your help!
ps. does the 1% tax only have to be paid for the year the overpayment was made? or does that continue forward until that money is withdrawn? I ask because my RRSP is tied up in that GIC!
Hi Tax Guy,
What if I made contribution in 2010 ($2200) but misplaced my receipt and forgot about it and therefore did not report it on schedule 7 of my income tax return. While preparing for this year’s return (2012) I stumbled across it can I somehow report it now?
Thanks,
Can an RRSP contribution (made in 2010) be clamied as a deduction in the future if the money has already been withdrawn under the HBP (2011)? If not, then would I have to make the deduction prior the the withdrawl (2011)?
Thanks,
Jerry,
The two are separate issues.
If you made an RRSP contribution and didn’t deduct it, then you can deduct it any time in the future. The maximum amount available to deduct is reported at (B) on your RRSP statement.
This has nothing to do with the HBP.
Thank you for the quick reply, much appreciated. I called revenue canada and they confirmed that the deduction can be made any time.
Jerry
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