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Table of Contents
Key Takeaways:
- RRSP savings can be converted to Retirement income.
- RRSP contributions may lower your taxable income and grow tax-deferred until withdrawal.
- RRSP savings could be used to buy your first home or fund your education.
- In 2025, you could contribute 18% of your earned income from the previous year or a maximum contribution of $32,490, subject to certain adjustments.
- Contributions exceeding the limit by $2,000 will trigger additional tax penalties.
Maximum RRSP Contribution limit and Deduction Rules in 2025
A registered retirement savings plan (RRSP) is an effective way to save for retirement.
There are a variety of eligible investments that you can hold in your RRSP, which include GICs, Mutual Funds, cash, ETFs, fixed income or stocks. By contributing to an RRSP, you may claim a tax deduction which may help to reduce the total amount of income tax you pay. Income earned within the RRSP is also tax deferred until it's withdrawn which may allow you to potentially build a larger retirement fund. To help you get started, we break down the RRSP contribution rules in Canada, so that you can make the most out of your plan.
Benefits of Contributing to an RRSP
Saving in an RRSP has a number of benefits.
- With an RRSP, your contributions may be tax-deductible, meaning that you can possibly claim a tax deduction for the amount you contribute and potentially reduce taxable income when filing your taxes. This means potentially paying less tax today and saving more money.
- Contributions and the growth of your investments inside an RRSP are tax deferred until withdrawn.
- While RRSPs are primarily used to save for retirement, if you are a first time home buyer you may withdraw funds from your RRSP to help with the down payment on a qualifying home through the Home Buyers' Plan or to fund your education through the Lifelong Learning Plan1.
- With a Spousal RRSP, couples can potentially reduce the family's overall tax liability by shifting retirement income from higher-income spouse to the lower income spouse.
When can I start contributing to an RRSP?
When it comes to RRSP eligibility, here are a few basics worth knowing.
- There is no minimum age for opening an RRSP. In fact, those under the age of majority in their province may be able to set one up with their parent or guardian.
- However, some financial institutions may require customers to be the age of majority.
- You may set up and contribute to an RRSP as long as you have certain earned income, RRSP deduction limit, and file a tax return.
What is an RRSP Deduction Limit?
Your RRSP deduction limit is what you may claim as a tax deduction on your income tax return for RRSP contributions. While the RRSP deduction limit and contribution limit can be the same, if you made a contribution in a prior year for which you did not deduct on your income tax return, these amounts can be different.
Your RRSP deduction limit can be found on your latest Notice of Assessment or Reassessment, or by contacting the Canada Revenue Agency (CRA).
How is my RRSP contribution limit calculated?
The annual RRSP contribution limit is generally calculated as follows:
- your unused RRSP contribution room at the end of the preceding year
Plus
- The lesser of the two following items:
- 18% of your earned income in the previous year
- the annual RRSP limit (for 2025, the annual limit is $32,490)
- Other adjustments where applicable (i.e. pension adjustments)
For additional information, please visit the Canada Revenue Agency.
How much can I contribute to an RRSP this year?
The amount you can contribute to your RRSP is determined by your calculated contribution room as described above. The best way to find your RRSP contribution room is to visit your My Accounts page on the Canada Revenue Agency (CRA) website, check your Notice of Assessment or Reassessment, or call the CRA.
As outlined by the Canada Revenue Agency, the RRSP dollar limits for previous years are included below;
|
Year |
RRSP Dollar limit |
|---|---|
|
2025 |
$32,490 |
|
2024 |
$31,560 |
|
2023 |
$30,780 |
|
2022 |
$29,210 |
|
2021 |
$27,830 |
|
2020 |
$27,230 |
What happens if I overcontribute to my RRSP?
Generally, if you overcontribute to your RRSP by $2,000 or less, you will not be penalized; however, you can't deduct these excess contributions from your taxable income. On the other hand, if you overcontribute to your RRSP by more than $2,000, you may be subject to a penalty of 1% tax per month on the excess amount.
If you determine that you have to pay this 1% tax, you have to send your completed T1-OVP return and pay the tax no later than 90 days after the end of the year in which you had the excess contributions.
You can withdraw the excess contributions to stop further penalties from accruing. A Form T3012A: Tax Deduction Waiver on the Refund of your Undeducted RRSP Contribution, may be used to ask the CRA for permission to remove the excess contribution with no withholding tax, subject to meeting certain conditions. Without the form, the withdrawal of excess contributions will be subject to withholding tax.
The T1-OVP return and the tax implications on what to do in an RRSP overcontribution situation are quite complex, you may wish to complete the forms and discuss your options with the help of a tax advisor.
Frequently Asked Questions
If you submit your T1-OVP, Individual Tax Return for RRSP, PRPP and SPP Excess Contributions after the deadline, you could be subject to a penalty of 5% of your balance owing, plus another 1% of your owed balance is added for each month you are late (maximum of 12 months). Your late filing penalty may be higher if CRA charged you a late-filing penalty on your T1-OVP return for any of the three previous years. Please visit the CRA to learn more.
The RRSP contribution deadline for the 2025 tax year is March 2, 2026. Also, December 31st of the year you turn 71 years of age is the last day you can contribute to your own RRSP.
There are a number of ways to see how much RRSP contribution room you have. You can refer to the RRSP Deduction Limit Statement on your latest notice of assessment or reassessment. You can call the CRA Tax Information Phone Service or log into CRA My Account.
The RRSP deduction limit can be defined as the maximum amount you can deduct on your income tax return from contributions made to your RRSPs, PRPP, SPP and to your spouse’s or common-law partner’s RRSP or SPP for a year.
Unused RRSP contribution room can be carried forward to future years. However, December 31 of the year you turn 71 years of age is the last day you can contribute to your own RRSP (or where your spouse turned 71 years of age for spousal RRSP).
There is no lifetime limit for RRSP contributions but there is a maximum amount you can contribute each calendar year.
Your employer's contributions to your group RRSP are considered as earned and taxable income. However, just like an individual RRSP, contributions towards a group RRSP are also tax-deductible and subject to your contribution limit.
Yes, an employer-sponsored pension plan does impact your RRSP contribution room. These plans, like defined benefit or defined contribution pensions can provide reliable income in retirement and may reduce how much you can contribute to your RRSP each year due to the pension adjustment (PA).
Your employer calculates the PA and reports it on your T4. Understanding how your pension affects your RRSP limit is key to maximizing tax-advantaged savings.
You can keep adding to your RRSP until December 31 of the year you turn 71. After that, you can still contribute to your spouse’s RRSP (if they’re under 71) or keep growing your savings with a Tax Free Savings Account (TFSA).
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