RRSPs RRIFs and TFSAs -> Company Pensions -> RRSP MPP and DPSP Contribution Limits
Anyone with RRSP contribution room can contribute to an RRSP, up to and including the year that the contributor turns 71 years of age. Contributions can be made to a spousal RRSP up to and including the year that the spouse or common-law partner turns 71 years of age. This maximum age was increased from 69 to 71 by the 2007 Federal budget, giving people an additional two years to contribute.
If the taxpayer was not resident in Canada, but had income from employment performed or a business carried on in Canada, this may also constitute earned income, unless it was exempt from income tax in Canada due to a tax treaty with another country.
Immigrants to Canada can get more information about Canadian income tax and RRSPs from the CRA publication T4055 - Newcomers to Canada.
The maximum RRSP contribution amount that can be deducted is called the "RRSP deduction limit", and is also known as "contribution room" or "deduction room". Your deduction limit is found on your Notice of Assessment or Notice of Reassessment from Canada Revenue Agency (CRA). Your 2018 limit would be on your 2017 Notice. The deduction limit is calculated as:
Note that RRSP withdrawals do not affect the deduction limit (contribution room) - that only happens with TFSAs.
The DPSP limit is 1/2 of the MP limit each year. The MP limit and DPSP limits for pension adjustment (PA) purposes are also restricted to 18% of compensation.
For each year after 2009 for RPPs and 2010 for RRSPs, the limits are indexed for inflation using the Industrial Aggregate average wages and salaries in Canada.
RRSP limits lag behind RPP limits by one year because RRSP limits are based on prior-year earnings, and RPP limits are based on current-year earnings.
The following deduction limit examples assume that the taxpayers do not have contribution room carried forward from previous years.
The maximum of $26,500 for 2019 would be reached at an earned income amount of $147,222 in 2018.
If the RRSP contribution is less than the deduction limit, then the "deduction room" or "contribution room" is carried forward to future years. Assume Taxpayer 3 made a contribution of only $10,000 for 2019. The unused deduction "room" of $16,500 can be carried forward and added to the calculation of the 2020 deduction limit.
It is not mandatory to actually deduct all of your contributions on the current year tax return. If you know you will be in a higher tax bracket in the following year, it may be an advantage to carry forward some or all of the contributions, instead of claiming them in the current tax year. The advantage of doing this must be weighed against the disadvantage of receiving the tax reduction in a later year. Any unused contributions will be carried forward until you decide to use them. Even if you are not claiming the contributions in the current year, you must record on your tax return that the funds have been contributed. There is no time limit on the carry-forward of RRSP contributions that have not been deducted - even if your RRSP has been converted to a RRIF, if you have contributions that have not been deducted, they can still be deducted in the future.
Unused contribution room (deduction limit) cannot be used to make a contribution to the RRSP of a deceased individual. However, it can be used to make a spousal contribution to the RRSP of the surviving spouse or common-law partner, in the year of death or during the first 60 days after the end of that year. These contributions can be claimed on the tax return of the deceased for the year of death.
For more on this topic, and examples, see Canada Revenue Agency's Contributing to your spouse's or common-law partner's RRSPs.
A taxpayer can contribute up to the amount of their deduction limit, plus an excess contribution as long as the total excess contribution never exceeds $2,000. However, the allowed excess will be less than $2,000 when the deduction limit is negative due to a PSPA amount. Also, only taxpayers who are 19 or older in the taxation year qualify to have an excess amount. Any excess contribution over $2,000 may be subject to a 1% per month tax.
Each individual taxpayer is ultimately responsible to ensure that they do not overcontribute to their RRSP - not their accountant or financial planner. Before you make a contribution, check your latest notice of assessment, or go online to My Account to see the amount of available contribution room. Take into account any contributions made since then. Keep in mind the Federal Court of Appeal decision in Connolly v. Canada (National Revenue) 2019 FCA 161, which upheld CRA's decision to refuse to waive penalties and interest on an overcontribution. See Jamie Golombek's June 2019 article discussing this case.
When an excess contribution greater than $2,000 has been made, contact your financial institution or brokerage as soon as possible to determine the best remedy. If the contribution has already been reported to CRA, application can be made to CRA using form T3012A Tax Deduction Waiver on the Refund of your Unused RRSP Contributions, in order to withdraw the amounts without having income tax deducted. CRA will return the form, indicating the amount that is authorized to be withdrawn without deducting withholding tax. However, a tax on the excess may still be payable.
See Tax on Excess Contributions in the CRA publication T4040 - RRSPs and Other Registered Plans for Retirement. If you are required to pay the tax on excess contributions, CRA's form T1-OVP Individual Tax Return for Excess Contributions must be completed. If you are not sure if you are required to pay the tax, follow the steps in CRA's Determine if you have to complete a T1-OVP.
Note re Home Buyer's Plan and Lifelong Learning Plan
Your RRSP contributions must remain in the RRSP for at least 90 days before you can withdraw them under the Home Buyer's Plan (HBP) or Lifelong Learning Plan (LLP), or the contributions may not be deductible for any year. In other words, if RRSP contributions are made in the 89-day period just prior to an HBP or LLP withdrawal from the RRSP, the value of the RRSP after the HPB or LLP withdrawal must be at least equal to those contributions.
To calculate savings from an RRSP contribution, see the Canadian tax calculator.
Canada Revenue Agency (CRA) Resources
T4040 - RRSPs and Other Registered Plans for Retirement - see RRSP contributions section
Tax Tip: Pay yourself first.
Revised: October 19, 2020
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