How Much Can I Contribute To My RRSP?

by Tax Guy - Burlington Accountant on February 17, 2011 Print This Post Print This Post

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.

About The Tax Guy...

Dean Paley CGA CFP is a Burlington accountant and financial planner who services individuals and business owners locally, nationally and internationally. Dean has appeared in the National Post, Toronto Star and Metro News.

To find out more, visit Dean's website Dean Paley CGA CFP or connect via Twitter @DeanPaleyCGACFP.

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{ 111 comments }

Sheila Bullock February 23, 2010 at 11:17 pm

My daughter is a stay home mom but still contributes to a RRSP. 2008 year she had no income other than Universal child credit but contributed 900.00 which we did not claim. She has another 900.00 for 2009. She cahsed in some of her RRSP money due to necessity. Can she claim her RRSP’s for 08 and 09 this tax return. Thanks

Tax Guy February 24, 2010 at 6:50 am

@Sheila: She can carry forward her contributions and use them in future years as deductions. If her income is low only for the period of time she will be raising children, then she should continue to contribute to her RRSP. However, if her income will be low for a longer period of time, the TFSA would be a better choice because the RRSP contribution is not useful (she can’t really use the deductions).

Kevin March 24, 2010 at 9:13 pm

I had no income in 2009, but I need to make a RRSP HBP repayment. Can I still make that payment? It seems like my tax software isn’t liking that.
Thanks

Tax Guy March 25, 2010 at 9:12 pm

@Kevin,
You should be able to make a contribution in 2009 for the purposes of re-paying under the HBP. I’m not sure why your tax software will not allow it because, your 2009 RRSP room is based on your 2008 income. Perhaps you misentered your RRSP carry forward room.

Marc Trottier April 5, 2010 at 9:42 am

Correct me if I’m wrong (with supporting link to CRA :) , but isn’t the 2010 RRSP contribution the lesser of 20% of your 2009 gross or 22,000 $CAD ?

Tax Guy April 5, 2010 at 11:27 am

For 2010, the limit is the lesser of 18% of your prior year’s earned income (this has not changed) to a maximum of $22,000. The rate has never been 20%.

http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/rrsp-reer/cntrbtng/lmts-eng.html and look at the link on that page http://www.cra-arc.gc.ca/E/pub/tg/t4040/README.html which gives a chart to calculate your limit yourself..

Damien Forer April 15, 2010 at 6:40 am

I have been a non-resident for the past six years and am returning to Canada in 2010. How can I find out my RRSP deduction limit for 2010?

Tax Guy April 15, 2010 at 11:39 am

Your RRSP deduction limit will be reported on your last notice of assessment. You can contact the CRA to obtain the number.

AENEAS MAC ISAAC April 21, 2010 at 1:29 pm

My2009 tax return info. was misplaced or lost and I need my RRSP deductions limit before I can send in my 2010 income tax return . Can you suggest another way to obtain this info. so that I can file my tax return on time?

Tax Guy April 21, 2010 at 7:18 pm

Hello Aeneas Mac Isaac:
Call the CRA! They have it.

Reh May 26, 2010 at 11:55 am

Hi:
I recently found two rrsp receipts for first 60 days of 2008. I’ve been contributing and using my allotted room every year but have not filed my 2009 rtn yet…
So what do I do with these receipts? Is there a limit of RRSP you can buy based on your room or can you buy more then you can claim and then claim later?
Can I claim the 1st 60 days of 2008 in my 2009 return and save newer receipts (1st 60 days of 2010) for my 2010 return instead of my 2009 return?

Tax Guy May 27, 2010 at 9:34 am

Hello Reh:

First of all, it is important to understand that the difference between the contribution limit and an RRSP deduction.

The contribution limit is the amount you can put in an RRSP during a tax year. For example, in 2009, you can contribute up to 18% of your 2008 earned income or $21,000 (which ever is less).

For your RRSP deduction, you may deduct contributions may in the tax year or 60 days in the year following. However, you are not required to deduct anything. Any contributions not deducted can be carried forward.

For 2009, you can deduct your contributions made from March 2009 forward through the end of February 2010. You should also be able to deduct the amounts from the 2 slips.

theo d'silva June 19, 2010 at 10:55 pm

dear sir, if my wife has rrsp room of 50,000 can i pay this thro my stock acct. i want her to get the benefit of that room. not a spousal rrsp. thanks theo

Tax Guy June 23, 2010 at 3:45 pm

Theo,
If you contribute the stock to your wife’s RRSP, it will affect your RRSP contribution and deduction room.

Jane July 8, 2010 at 5:06 pm

If an individual knowingly exceeds their RRSP limit by putting the eligible amount of a retiring allowance in their RRSP, the implications affect the employee only, not the employer correct?

Thank you!

Tax Guy July 8, 2010 at 9:10 pm

Hi Jane,
Yes. There is a 1% penalty tax per month for amount that exceed your limit. Administratively the CRA applies the tax when the overcontribution exceeds $2,000.

ahmed September 13, 2010 at 5:29 pm

hi there, my RRSP Deduction Limit is $2024 i was wondering if i could make withdrawl from my RRSP Deduction Limit?

Tax Guy September 13, 2010 at 6:38 pm

Ahmed,
You can withdraw any amount from your RRSP.

The deduction limit is the amount of contributions to an RRSP you can claim as a tax deduction.

Serge October 18, 2010 at 10:22 pm

Hi,
I am participating in the Home Buyers’ Plan and also have a registered pension plan through employer. Is there a way I could designate my contributions to RPP as part of repayment under the HBP?
Thank you in advance.

Tax Guy October 19, 2010 at 5:20 am

Unfortunately RPP contributions are locked and cannot be designated as HBP repayments.

JP (The Rat) November 4, 2010 at 8:57 pm

Hi TG,

I have two questions regarding RRSPs:

1. If I have say $40,000 worth of RRSP contribution room (as listed on my Notice of Assessment), does that mean I can contribute that much this year if I wanted? I know it’s supposed to be 18% of your prior year’s income or a maximum of $20,000 or so, but if you have room built up, can’t you invest the whole amount if you want?

2. Foreign content: If the answer to #1 is yes, can I invest the whole amount (the full $40,000) in U.S. equities/foreign content?

Thanks,
JP (The Rat)

Livia November 8, 2010 at 11:27 am

Does a person have both $22,450 (pension max) and $22,000 (rrsp max)? Or
is it a total of 18% for both? The question occurred to me while looking
at my notice of assessment from the government last year that the
pension adjustment reduces my RRSP room so that confused me. Can you
set me straight?

Tax Guy November 9, 2010 at 1:45 pm

Pension and RRSP’s are integrated and so your RRSP contributions are reduced by DCP or DPSP plan contributions and by DBP amounts.

AHomer November 20, 2010 at 5:04 pm

I turned 71 in 2010 so this is the last year I can contribute to an RRSP. (i haven’t previously done this) My tax return says I can contribute $17,402 in 2010. My taxable income for 2010 will likely be $58,000. ( $ 55,000 comes from pensions) and I paid roughly $10700 tax on a similar amount last year.
Question: As most income is from pensions,does this count for a tax reduction? How much tax could I save by contributing the $17,400
/$10,000/$5000.

Tax Guy November 22, 2010 at 9:42 am

Hello,

As long as you have RRSP contribution room, you can make a contribution before December 31, of the year you turn 71. It does not matter what income it’s deducted against, only that you have the room.

You could contribute up to $17,402 for 2010 and the actual contribution “must” be made on or before December 31, 2010.

To determine your tax savings, use the E&Y Calculator and cross reference your province. You enter your taxable income and your RRSP contribution. The link to the calculator is here.

Gary December 6, 2010 at 11:29 pm

I wish to move my company pension into a locked in rrsp. What is the maximum amount I can transfer and how is it calculated. I am 53 years old and have heard recently lost my job. The total payed into my pension at the moment is 168,000 dollars

Tax Guy December 7, 2010 at 5:10 pm

Hello Gary,
The pension plan can tell you ow much can be rolled over an how much is taxable. Most should be rolled over.

David Cowley December 26, 2010 at 8:53 pm

Can I use the amount on my 2009 Tax Assessment that the CRA indicated was the max I can contribute in 2010? My earned income is less in 2010 and I withdrew some RRSP monies in 2010. It appears one’s contribution amount is based on the prior years’ earned income not the current years earned income. Is this correct? If so can you direct me the CRA literature that can give some direction on this issue. Thanks

Tax Guy December 27, 2010 at 9:02 am

Your 2010 earned income will only affect your 2011 RRSP limit. You use the amount on your 2009 NOA as your 2010 RRSP limit. The CRA document is here.

Juan December 30, 2010 at 8:25 pm

Hi there I have $ 7,558 deduction limit How can I make a withdraw? and where do I have to go to do it and how much can I withdraw there is a special time of the year to do it. I am new in Canada this is very new foer me. Thank you for your information

Tax Guy December 31, 2010 at 4:11 pm

You can withdraw whatever is in your RRSP account. Check your RRSP account at your bank or investment brokerage account. The withdrawal will be added to your taxable income for the year.

If you do not have an RRSP account, you can contribute up to your RRSP deduction limit.

cordt Euler January 3, 2011 at 12:14 am

I’ve been contributing 21% of my income to a RPP, since I have a large amount of unused RRSP contribution room. Is this OK? Specifically, does an RPP work the same way as an RRSP, in that unused RRSP contributions apply to a RPP, or are they seperate entities? Thanks!

Tax Guy January 4, 2011 at 8:58 am

RPP’s and RRSP’s are integrated from a contributing point of view. Review your Notice of Assessment or Reassessment and look at the RRSP statement. If line (B) is more than line (A), you may be subject to a penalty tax.

Marta J January 13, 2011 at 4:15 pm

Hello;

How much should I contribute to RRSP’s to get a maximum return on my income tax? My income will be roughly $39,000. My RRSP limit is $30,000 so I have lots of room to play with. I will be taking out the money later on this year for my first home. I have already taken out $10,000 for my home from the $25,000 allowance.

Thank you,
Marta

Tax Guy January 13, 2011 at 5:00 pm

Your RRSP limit for the 2010 tax year will be shown on your 2009 Notice of Assessment, which I assume is $30,000. You could contribute up to $30,000 but only deduct an amount that would reduce your tax payable to zero. This will be somewhere around $10,000 depending on your province of residence. The excess can be carried forward and deducted in future years.

Use this calculator to determine the magringal benefit of a contribution and optimum deduction: http://www.ey.com/CA/en/Services/Tax/Tax-Calculators-2010-RRSP-Savings

karen January 19, 2011 at 9:18 am

What benfits are there to maxing out a spousal rrsp in the higher income bracket, now that the income splitting tax rules have changed?
Thank – you

Tax Guy January 19, 2011 at 10:25 am

Income from RRSP’s that are converted to a RRIF or used to buy a registered annuity can only be split if the annuitant is 65 or older. If you retire before age 65, then spousal RRSP’s still make sense.

Kim Wright January 19, 2011 at 7:05 pm

When can I put an RRSP eligible investment into my self-directed account for the 2011 Tax Year?

I know I have 60 days to contribute to my 2010 tax year but I want to make sure that a contribution made in the first 60 days of this year goes to my 2011 tax year.

Is this correct?

Thanks.

Tax Guy January 20, 2011 at 12:06 am

You can make an RRSP contribution in any time in 2011! You have the choice to deduct it in 2010 or 2011.

Kim Wright January 20, 2011 at 10:38 am

Thank you

Josh January 26, 2011 at 7:29 pm

Hi, I’m not sure where to start but here goes…

Before 2010, I made no income.
During 2010, I made $30,000.
In December 2010, I contributed $5000 (<18% of $30,000) into my RRSP.

Did I overcontributed?
Was I suppose to contribute the $5000 in 2011?
Am I penalized for one month then (ie 1 X 0.01 X (5000-3000))?
Will I have to wait until 2012 to submit my rrsp tax return?

Any other things I should know about? I'm new to rrsp as you can see.

Many thanks,
Josh

Tax Guy January 27, 2011 at 10:09 am

The amount you can contribute to an RRSP in 2010 is 18% of 2009 earned income to the maximum RRSP limit.

In December you over contributed by $5,000 and will have a penalty tax of 1% on $3,000 of it for one month. You cannot make an RRSP contribution until 2012 because your 2011 earned income will determine your 2012 RRSP room.

File your taxes as normal, report the contribution on Schedule 7 but you will not be able to claim the deduction. Also complete CRA form T1-OVP.

fred February 6, 2011 at 6:07 pm

Hi

I just got and amount of 9000$ transfered from my work RPP to my own RRSP account …. can I claim the 9000$ as tax deductible or not?

Tax Guy February 7, 2011 at 8:10 am

No. The amount was transfer from one registered plan to another.

Andrew February 8, 2011 at 11:49 pm

Hi,
I am currently 23 and I’ve heard rumours about how if you buy RRSP, the government will give you a tax refund. Is that correct? Because I am thinking of buying RRSP

Tax Guy February 9, 2011 at 8:43 am

Andrew,

An RRSP is an account and not something you “buy”. With that account you can make investments.

The deposit to the RRSP account can be used as a tax-deduction. The deduction lowers your taxable income and you may get a refund. However, if your annual income is lower than $10,382, the deduction is effectively useless. If taxable income is under $40,000, the RRSP may not produce much benefit in the long run and the TFSA may be a better option.

If your income is low now but you expect to have high income in later years, you may contribute to an RRSP now and carry the deduction forward an use it when you have higher taxable income.

A downside to an RRSP is that any withdrawals from the account are added to your taxable income and increase your tax bill. The withdrawals cannot be used to re-create your contribution room either.

If you are saving for retirement, then by all means use the RRSP. If you are not 100% sure it will be used for retirement now (or the HBP), or if you have a low income level, then put the money in the TFSA. If you have higher income later or if you are more certain the funds are for retirement, then you can remove the assets from the TFSA and make an RRSP contribution.

Andrea February 9, 2011 at 3:57 pm

Hi There,

I have consistently contributed to my RRSPs every year and maxed out the allowable amount each year – 18% of previous years income, etc. My employer declares bonuses based on 2010 resutls in February 2011 and allows us to contribute all or part of the bonus amount directly into an RRSP account (without having to pay all the taxes). I have already maxed out my 2010 RRSP contribution limit, however I am currently pregnant and will be off of work for the majority of the 2011 year. During 2011, I will have some income from my employer (first 2 months of the year), EI and some rental properties. Does it make sense for me to “roll” my 2010 bonus (which is paid Feb. 2011) into my RRSP account and then claim this as an RRSP deducation for 2011? Can you please confirm that this is allowable?

Thanks,

Tax Guy February 9, 2011 at 4:29 pm

There is no “rollover”! A rollover is a term used to explain situations where funds are put into the RRSP without impacting the contribution room.

The bonus payment can be contributed to your RRSP subject to your RRSP contribution limit. If you have already made the maximum contribution for 2010, then you really cannot contribute more for the 2010 tax year. You can make the contribution for 2011 based on 18% of 2010 earned income less any 2011 contributions already made.

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