One of most common questions about RRSP’s is how much can be contributed to an RRSP? The rules may seem complicated, but for most Canadians, it’s pretty straight forward.
The first thing you need is an RRSP account. You can open an RRSP or transfer your RRSP to Questrade. If you use the offer code taxresource, you can have a $50 commission rebate.
If you filed an income tax return last year, you would have received a Notice of Assessment from the CRA. Your RRSP contribution limit is reported on the Notice of Assessment. For example, the amount you can contribute to your RRSP in 2011 would be reported on your 2010 Notice of Assessment.
How Is The RRSP Contribution Limit Calculated?
The amount you can contribute to your RRSP is determined by your earned income last year and the maximum RRSP limit. Some adjustments are made if you were a member of a pension plan or other type of employee sponsored retirement plans.
The maximum amount you can contribute to your RRSP and subsequently deduct on your income tax return in any given year is limited by your RRSP deduction limit. The RRSP deduction limit may also be referred to as contribution room or deduction room.
The RRSP deduction limit is calculated by:
- Taking the lesser of 18% of your previous years earned income from the immediately preceding year or the RRSP Dollar Limit for the year,
- LESS: The your previous year’s pension adjustment (PA) reported on your T4 if you were a participant of your company’s deferred profit sharing program (DPSP) or registered pension plan (RPP),
- PLUS: Unused deduction room carried forward from prior years,*
- PLUS: Pension adjustment reversal from past years, and
- LESS: Net past service pension adjustment (Net PSPA).
* If you deducted less than the maximum, the unused RRSP contribution room is carried forward and can be used in later years.
The RRSP dollar limit is reported annually by the CRA. See the Rates & Tools page for the most recent RRSP Dollar Limit.
Are There Age Limits?
As long as you had earned income in the last tax year, you can contribute to an RRSP up to and including the year in which you turn age 71. Your contributions can be to your own RRSP or to your spouses’ RRSP. See What is a Spousal RRSP?
Looking For Professional Help?
If you’re looking for advice or tax planning services, you can contact me directly through my professional tax practice.
Related Articles
- What Happens if I Contribute More Than My Deduction Limit?
- Annual RRSP Contribution Limits
- RRSP Resource Guide
- RRSP’s & Moving To The U.S.
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how can i find out my unused rrsp contribution
It’s reported on your Notice of Assessment or Reassessment. You can also call the CRA.
If I transfer pension funds to an RRSP does that constitute my RRSP contribution for the year? And if so, is there a problem if the amount of the transfer exceeds my contribution limit?
Moving funds from a RPP to and RRSP is a transfer between registered plans and has no impact on your contribution room.
The Canada Revenue Agency website is a nightmare and all you can get on the phone are irrelevant recorded messages, so thank you for your clear information about RRSP deduction limits and RPPs!
You’re welcome!
I came to Canada in late 2010 and hence my earnings for 2010 were low. My income for 2011 was higher since I was here all year. I will move out of the country in April 2012. My RRSP limit for 2010 was $0 since I came to Canada only in late 2010. Hence, my CRA calculated RRSP limit for 2011 is only $2k, while I have made RRSP contributions of close to $18k in 2011. Is there anyway I can deduct the $18k for 2011, or can I deduct only 2k in 2011 and the rest will carryover to 2012?
You can only deduct up to your RRSP limit of $2,000. The excess contributions less a CRA administrative amount of $2,000 will be subject to a 1% penalty tax per month until the excess is withdrawn. If your limit was $2,000 and you contribted $18,000, the penalty tax will be based on $14,000.
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