RRSP Contribution and Deduction Limit Rules
Benefits of Contributing to an RRSP
Saving in an RRSP has a number of enticing benefits.
- With an RRSP, your contributions are tax-deductible, meaning that you can deduct the amount you contribute from taxable income when filing your taxes. This means potentially paying less tax and saving more money.
- Any growth of your investments inside an RRSP is not taxed until withdrawn, potentially allowing your savings to grow faster.
- RRSPs are versatile savings vehicles – while the primary purpose of RRSPs is to save for retirement, you can also use your RRSP to help with the down payment on your first home through the Home Buyers' Plan or to fund your education through the Life Long Learning Plan1.
- Interested in growing a retirement nest with your spouse or common-law partner? With a Spousal RRSP, couples can more evenly split their retirement income.
When can I start contributing to an RRSP?
- There is no minimum age for opening an RRSP. In fact, those under 18 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 can set up and contribute to an RRSP as long as you have employment income, contribution room, and file a tax return.
How is my RRSP contribution limit calculated?
- Pension adjustments, past service pension adjustments, pension adjustment reversals, and unused RRSP, PRPP or SPP contributions at the end of the previous year can also affect your RRSP contribution limit.
How much can I contribute to an RRSP this year?
The Canada Revenue Agency generally calculates your RRSP deduction limit as follows: the lesser of 1) 18% of the earned income you reported on your tax return in the previous year and 2) the annual RRSP limit as listed on the previous year’s tax return, up to a maximum of $26,500 plus any contribution room carried forward from previous years less any pension adjustments.
RRSP contribution limits for previous years were:
- 2018: $26,230
- 2017: $26,010
- 2016: $25,370
- 2015: $24,930
- 2014: $24,270
- 2013: $24,820
- A request to cancel or waive the tax.
- Copies of your RRSP, PRPP, specified pension plan (SPP) or RRIF statements that show the date you withdrew your excess contributions.
Any other correspondence that shows that your excess contributions are due to a reasonable error.
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What is an RRSP?
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1 Subject to eligibility and conditions.
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