Your RRSP contributions are tax deductible. That means you can claim them as a tax deduction when you file your income tax return — and lower the tax you pay.
How much you can contribute each year
There are limits on how much you can contribute each year to your own RRSPs and your spouse's RRSPs. Your total contribution room for the year is the lower of:
18% of your earned income for the previous year, or
the maximum contribution amount for the current tax year: $23,820 for 2013.
If you are a member of a pension plan, your pension adjustment will reduce the amount you can contribute to your RRSP.
Where to find your RRSP deduction limit: You can find your RRSP deduction limit on your most recent Notice of Assessment from the Canada Revenue Agency (CRA). You receive this Notice of Assessment after you file your tax return. You can also view your deduction limit online if you register for CRA's My Account.
Be aware of the contribution deadline
You have 60 days after the end of the year (usually until March 1, or February 29 in a leap year) to make your RRSP contribution for the previous year. For the 2013 tax year, March 3, 2014 is the deadline.
Build your savings faster by making your contributions early in the year. Read Planning your RRSP contributions: Gary, Kevin, and Judith’s story.
Carrying forward unused contribution room
If you don’t have the money to contribute to your RRSP this year, you can carry forward your contribution room indefinitely to future years. This unused contribution room will be taken into account on your RRSP Deduction Limit Statement, which you can find on your most recent Notice of Assessment or on CRA's My Account.
Example – Your contribution room was $15,000 in 2012 but you didn't make an RRSP contribution. You carry this forward to 2013. If your 2013 contribution room is $23,820 (the maximum amount), you can make total RRSP contributions of $38,820 ($15,000 + $23,820) in 2013.
Thinking about borrowing to make an RRSP contribution? Make sure you can afford to make the loan payments and plan to pay back the loan right away. Consider using your tax refund to help pay down the loan. Interest charges are not tax-deductible. They can add up and offset the initial benefit of making the RRSP contribution. Learn more about borrowing to invest in an RRSP.
Unused RRSP contributions
You don't have to deduct an RRSP contribution on your tax return in the same year you make the contribution. You can wait and deduct it in a future year. You may choose to do this if you think your income will be higher in the future, moving you up to a higher tax bracket. This is called having unused RRSP contributions. Learn more about how it works.
What happens if you over-contribute
In general, you have to pay a tax if your unused RRSP contributions from prior years and your current contributions exceed the RRSP deduction limit shown on your latest Notice of Assessment by more than $2,000. The tax is 1% per month on the excess amount. Learn more about excess RRSP contributions.
If you're a member of a pension plan: If you've already put money into a pension plan, you can’t put as much into an RRSP. Learn how your RRSP contribution room may be affected by participating in a pension plan.
Content in this section is provided in partnership with Investor Education Fund, a non-profit organization founded and supported by the Ontario Securities Commission that provides unbiased and independent financial tools to help Canadians make better money decisions. To find out more, go to: GetSmarterAboutMoney.ca
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