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 }

Aaron February 10, 2011 at 1:05 pm

Like Andrea I also received a bonus and had 80% of it put directly to our group RRSP rather than being paid out so that portion was not taxed. Can I claim that as a deduction on my tax return too?

Tax Guy February 10, 2011 at 4:53 pm

The contribution to the RRSP is not subject to withholding of payroll tax at source but is still included in your taxable income. So yes, you can claim the contribution.

Jan February 15, 2011 at 11:35 am

Hello! I have a RPP at work. For the employer RPP contributions, does it gross up my income by the amount of the employer RPP contribution amount? Or is it a direct deduction from my total income before tax is calculated?

Tax Guy February 16, 2011 at 4:31 pm

The pension contributions affect your pension adjustment, which reduces your RRSP contribution limit. With a defined contribution plan, the PA is the contributions to the plan. The following article on Pension Adjustments explains how the PA is calculated for Defined Benefit plans.

J February 16, 2011 at 11:31 pm

Hello, I’m a new graduate in 2009 and so in 2009 I only worked for 5 months

In 2009, I didn’t contribute to my RRSP since I didn’t have to pay much tax

In 2010, my carry over RRSP contribution room from previous years was $12 000, also since I worked for the full year my income was higher so that I can contribute the maximum allowable RRSP (22K) , however I did not make any contributions.

In 2011 January, I’m planning to buy a house and wanted to make use of the HBP so I purchased a 25K RRSP, have I over-contributed since my allowable for the 2010 taxable year should still be only 12000??

Tax Guy February 17, 2011 at 4:22 pm

Your 2010 contribution limit would have been reported on your 2009 Notice of Assessment or Reassessment. The 2010 contribution limit is based on carry forward room from 2008 and prior PLUS 18% of your 2009 earned income (or $22,000 whichever is less).

Assuming your 2009 NOA reported $12,000 of contribution room and you contributed $22,000, you over contributed to your RRSP in 2010 by $8,000. The penalty tax is 1% per month on the amount of over contribution that exceeds $2,000.

You have not said what your 2010 earned income was, but for 2011, your contribution limit is the lesser of 18% of your 2010 earned income or $22,450 which ever is less. You must deduct any over contribution from last year or add and carry forward from last year.

J February 17, 2011 at 6:37 pm

Thanks Tax Guy,

After reading from the replies on your blog, my understanding is this, please allow me to clarify:

My 2010 contribution room is 12000 (as shown on my 2009 NOA)
My 2011 contribution is 12000 + 18% of my income in 2010 (which I calculated will have the upper limit of 22 000) so therefore I will have contribution room of 30 000+ for 2011

Since I contributed the 25K in January 2011, the amount that I over contributed for 2010 can be counted towards my 2011 contribution and therefore I will not be penalized. Is this correct?

Thank you again.

Tax Guy February 18, 2011 at 1:34 pm

Your 2010 contribution limit was set at $12,000 and you believe you have accumulated an additional $22,000 of contribution room for 2011 based on your 2010 income.

You may a $25,000 RRSP contribution in 2011.

For 2010 the maximum deduction is the $12,000 of the $25,000.

For 2011 you can deduct the remaining $13,000 and should have $9,000 of room for 2011 remaining.

Terry February 18, 2011 at 12:37 am

what is “unused RRSP contribution” as per CRA’s notice of assessment? Is it the same as ‘excess contribution’? thanks

Tax Guy February 18, 2011 at 1:44 pm

Unused contribution room means that you made an RRSP contribution in the past but did not use the deduction.

Ken February 19, 2011 at 10:25 am

If the amount of (b) on your Notice of Assessment is “0″ and the amount of of (a) is $28,000 does that mean you can contribute that amount of money to your RRSP over and above your regular contributions?
Thanks

Tax Guy February 19, 2011 at 11:26 am

Hello Ken,
It means that you can contribute up to the amount on Line a.

Mary Allen February 20, 2011 at 11:04 am

I contribute 2.5% of my salary to an RRSP and my employer matches dollar for dollar. Can I claim the portion I contribute on my income tax. I have heard different answers and want to make sure before I complete my taxes

Tax Guy February 21, 2011 at 4:34 pm

Mary,
Yes. You claim your contribution and your employers. The employer contribution is included in your taxable income and if you don’t claim it you will end up paying taxes.

Mary February 20, 2011 at 10:07 pm

My husband has 28,000.00(B) of unused RRSP contributions available for 2010. His RRSP deduction limit for 2010 is 22,000 (A). He seems to think that he can claim this RRSP on his 2012 return. I think he is going to be hit with the 1% monthly penalty. Who is right?

Tax Guy February 21, 2011 at 4:36 pm

Mary,
The amount on line (b) is contributions made in past years but not deducted. A is the contribution limit for the year. If b>a then he may be in an over contribution position and may be subject to the penalty tax.

Mary February 20, 2011 at 11:44 pm

I forgot to mention in the first comment that he bought a RRSP for $10,000.00 a few days ago and thinks he can claim it on his 2012 return because we don’t have enough room.

H. S. Jawanda February 21, 2011 at 3:32 pm

I have been member of a registered pension plan. So I have my RRSP limit for this year. However, since I have reached 35 years of service this year, my employer stopped deductions to my registered pension plan. Can I contribute more than the contribution on my 2009 tax notice with these new circumstances? Or am I stuck with the limits on my Notice of Assessment?
Thank you

Tax Guy February 21, 2011 at 4:46 pm

You are limited to the amount on the NOA.

KEVIN February 26, 2011 at 9:58 pm

I contributed $1000 and my company matched an additional 50% or $500 toward an RPP for 2010. I noticed $1000 on line 207 on my 2010 T4 slip. Can my RPP contribution of $1000 be used towards my 2010 RRSP deduction limit?

Tax Guy February 26, 2011 at 10:21 pm

Kevin,
Line 207 is on the tax return and is where your deduct the pension contribution. It will lower your RRSP limit next year.

Stef February 28, 2011 at 10:50 am

If I am financially able to do so, is it beneficial for me to make a final contribution to my RRSP’s for my 2010 income tax? If so, is there a certain amount that I should invest based on a yearly income of 30,000. According to my notice of assessment after filing last year, I can contribute over 11,000 for 2010. Through bi-weekly contributions I have probably invested only 2200.
As I am fairly new to investing, I am very unsure of the tax breaks/benefits of contributing as much as possible.
Thank you!

Tax Guy February 28, 2011 at 4:23 pm

Hi Stef,
Contributions and investments are separate issues. The RRSP contribution is a deduction from your taxable income. Whether it’s a benefit or not is based on individual circumstances. At $30,000 a year, you are already in the lowest tax bracket in most provinces and while you may get a tax refund, it’s questionable whether in the long run it will make financial sense for you. Using your TFSA may be better right now.

What you invest the contribution in, is an investment decision that is based on risk tolerance, time horizon, asset allocation etc. You might want to work with a financial advisor if you are new to investing.

Tax Guy February 28, 2011 at 4:26 pm

Puzzled,
No, but it sounds like you are allocating distributions to a shareholder.

Using the corporate account for personal expenses should be kiboshed. It is hard to manage the corporation and can cause problems in an audit. The owner should be writing themselves a cheque one or twice a month instead.

Jason March 1, 2011 at 12:43 pm

In 2010 I transfered my “Company Pension” to my own bank as a locked RRSP. Question, does this qualify as a RRSP contribution and will I see tax savings from it?

Thanks

Tax Guy March 1, 2011 at 6:11 pm

Jason, no it does not. It’s considered a transfer from one register planned to another registered plan.

manu patel March 1, 2011 at 6:36 pm

I had $5049 room for this year RRSP limit after pension adjustment.
I made monthly contribution to RRSP. Now In Feb 2011 i made lump-sum contribution but by mistake i made $1800 over the limit.
Can i use this(first 60 days) contribution for my next year filing?

Tax Guy March 1, 2011 at 8:10 pm

You have the choice of using it for last year or this year.

Manu patel March 2, 2011 at 1:02 pm

Thanks Mr. Tax guy,
I want to split my RRSP contribution for this year and next 2011 tax filing. How to report in tax filing? Can i declare all amount this year tax filing? or i just have to put the max. allowed amount this year and rest i can claim in next year filing? I am using tax software to do my filing.

Thanks again,

Tax Guy March 2, 2011 at 4:06 pm

Report the amount you want to deduct on line 10 of schedule 7 and follow the rest of the instructions on the schedule.

wendy March 2, 2011 at 6:44 pm

hi taxguy

im a little confused…
i have an unused rrsp deduction of 500 from 2009..
2010 has been a very low earning yr for me..can i carry forward
this unused rrsp deduction for 2011 taxes?
i still have room in my deduction limits as to not get a penalty

Tax Guy March 2, 2011 at 7:49 pm

You can carry forward the unused deduction definitely as long as you have contribution room available.

manu patel March 3, 2011 at 9:06 pm

Can we claim our kids as dependent in tax file? If Yes, Then how much (max.) we could claim? and who shuld claim it (Mother or father?)?
We are paying childcare and claiming it every year. In this case we allowed to claim dependent?

Thanks in Advance,
M. Patel

Tax Guy March 3, 2011 at 9:25 pm

Manu,
What does this have to do with RRSP contributions?

stanely Au March 4, 2011 at 11:42 pm

If i contributed $2100 as RRSP over the limit in first 60 days(Jan-1 2011 to Mar – 1-2011), Is it OK to claim this amount next year filing? Does i need to pay any penelty on this amount?

Tax Guy March 5, 2011 at 11:07 am

The issue is moot. If you contributed in 2011, you can either claim it for 2010 or 2011. If the contribution in 2011 puts you over the 2010 limit, you can’t take the deduction.

Richard March 15, 2011 at 9:00 pm

I transfered my regular RRSP into LSIF of $7000 on Feb, for it has 25% tax credit.
Could I file $5000 for this year, the rest for next year. As the federal credit is up to $750 ($5000 * 15%).
Thanks.

Colleen March 19, 2011 at 11:08 pm

My husband had both a T4 and a T4A when we prepared his 2009 Income Tax. This was because he worked for part of 2009 and then retired.

His NOA for the year 2010 showed that his RRSP deduction limit for 2010 was $4395 and that he had $1605 of (B) unused RRSP contributions.

While preparing his Income Tax (after March 1st), I realized that he could have contributed $4395 to an RRSP in 2010 but because he had retired I thought he couldn’t contribute to an RRSP any longer.

Is this opportunity lost to contribute the $4395 into an RRSP if it wasn’t done before March 1st?

I used the $1605 and he received a refund on his return but it would have been much larger if we would have maxed out his 2010 contribution room.

Please advise.

Thank you

Tax Guy March 21, 2011 at 2:49 am

You can’t contribute for 2010 but you can for 2011. You can contribute to an RRSP until December 31st of the year you turn 71.

John March 24, 2011 at 10:35 am

In 2010, i withdrawal about 3200 from RRSP. Limit for contributioin for 2010 was 2710, but somehow i contributed of about 4000 in first 60 days of 2011 and my employment income of 2010 is only 8500. So, am i going to get any penalty or tax on excess contribution

Tax Guy March 24, 2011 at 1:51 pm

Your contribution limit for 2010 was $2,710 which was based on your 2009 income.

Your 2010 income was $8,500 which adds $1,530 of RRSP contribution room.

Your RRSP room (assuming you made no contributions IN 2010) would be $4,240.

You contributed $4,000 in the first 60 days of 2011.

You can claim $2,710 for 2010 and carry the remaining $1,290 to 2011.

John March 28, 2011 at 6:21 pm

In connection with my previous question, can i simply carry forward 4000 contribution for 2011 Income. Or how much the max contributed amount can be transfered to 2011 room without any penalty and what are the penalty rates?

Tax Guy March 30, 2011 at 11:48 am

There is no requirement that you deduct your RRSP contributions. As long as you do not exceed your contribution limit, you can carry your contributions forward and deduct them in later years.

Saba March 30, 2011 at 2:20 pm

Contribution limit for 2010 was 2800, and i invested in first 60 days of 2011 of 5000 and no benefit for tax refund is coming whether i deduct this 5000 or not. So can i carryforward this 5000 contribution for next year. I heard also excess contribution can be carryforward max 2000 and rest would be penalize. Is that true

Income for 2010 was 9000
and for 2011 would be around 50000

Tax Guy March 30, 2011 at 4:28 pm

You can deduct contributions made in the first 60 days of 2011 against your 2010 income. Your 2011 contribution limit is $2,800 plus 18% of 2010 income for a total of $4,420. This assumes you made no contributions to an RRSP in 2010.

You contributed $5,000 which is $580 more than you were permitted. Since there is an administrative policy not to penalize you unless the overcontributions is more than $2,000 you are OK.

Give the low annual income you have, a RRSP is of little value to you. I would suggest you contribute to a TFSA now. The TFSA give you the tax-free growth and access to the funds without having to include the withdrawal in your income. When your income is higher later, you can withdraw from the TFSA tax-free and make an RRSP contribution.

Generally if you are in the bottom tax bracket an RRSP does not make financial sense because you will withdraw later at the same or higher tax rate.

Marcus April 1, 2011 at 8:45 am

I moved to Canada last year and earned 12,000 in 6 months. I have now moved jobs and im earning $56,000 per year. What will I be able to put in next years RSP can I include contributions which I make to my companies savings plan?

Tax Guy April 2, 2011 at 10:29 am

The maximum you can contribute to an RRSP, DPSP or other registered retirement plan is 18% of last years earned income to the annual maximum.

Assuming the $16,000 was earned income your limit for 2011 is $2,880.

Rebecca Garcia April 4, 2011 at 2:46 am

Dear Sir/Madam:

My income in 2010 is just almost $5,000. If I bought RRSP $10,000, will I have refund? If so, how much?

Thank you.

Sincerely,

Rebecca

Tax Guy April 4, 2011 at 3:24 pm

If you contribute to an RRSP, you will have no refund. $5,000 is not enough to pay tax.

Chris April 5, 2011 at 6:32 pm

I got a very large tax return for the 2009 tax year (approx $3100), but I’m about to file my 2010 taxes and am surprised to see that I’m only getting approx. $400 back. My friends say it’s due to a large discrepancy between my income for the 2010 year (approx $68,615) and the income tax deducted for 2010 (about $10,500).

I suspect it’s because of a February 2010 bonus I received (about $7700) that I had my employer put directly towards RRSPs, so no income taxes were taken off that amount. So I included that RRSP amount when filing my 2009 taxes. Is the fact that I’m getting a small 2010 tax return due to the fact that this bonus was not taxed and counts towards my 2010 Employment income? I haven’t gone over my RRSP limit last year or this year and I also contributed about $10,000 or $11,000 to my 2010 RRSPs.

Tax Guy April 5, 2011 at 9:28 pm

It sounds like it’s the RRSP. The bonus paid to the RRSP in 2010 would have added the payment to your income for 2010 but you took the deduction for 2009.

Robyn Candell April 5, 2011 at 9:15 pm

I am a U.S. citizen with permanent resident status in Canada. In the U.S., the amount one may put in a “traditional IRA” is limited to $5000 at the present time. However, my RRSP limit is much higher and I have been contributing over the $5000 limit of the U.S. Am I limited by the U.S. rules as a U.S. citizen?

Tax Guy April 8, 2011 at 8:41 am

The US rules only apply to the IRA and not the RRSP.

Yvonne April 7, 2011 at 12:10 am

How much can be contributed to an RRSP for 2010 if you did not have any prior year’s income? Also, where would you declare the first 60 days of 2010 RRSP contributions if you don’t have a previous years claim to adjust?

Tax Guy April 8, 2011 at 9:00 am

The article answers your question!
The 2010 RRSP contribution limit is 18% of your prayers earned income. If you had no earned income in 2009, then your RRSP contribution limit is zero.

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