Remaining RRSP Contribution Room
Every year we have earned income, we earn RRSP contribution room; 18% of your earned income to the allowable maximum for the tax-year. When you contribute to your RRSP throughout the tax year, whatever you don’t use of your contribution room rolls over into the next tax year, to be added to the current 18%.
Remaining contribution room is different from unused RRSP contributions. These are RRSP contributions you made but didn’t use to reduce your taxable income. RRSP contributions are not taxed when you deposit them into your investment account, they are taxed when you take them out in retirement; their tax is “deferred”.
What is My RRSP Contribution Room?
The Canada Revenue Agency (CRA) sets the limit on how much you can contribute to your RRSP. You can contribute less money to your fund, but you cannot contribute more than the maximum per year or remaining contribution room. The maximum is a percentage of your income.
For the 2019 tax year, the maximum was 18% of your total income, to a maximum of $26,500 in 2019 or $27,230 in 2020. That means that those who make over $145,722 and who pay the maximum amount may end up contributing less than 18% of their income to their RRSP. You may also be contributing less than this is you have a private pension plan or deferred profit-sharing plan.
Remember that the money you contribute to your RRSPs is tax deferred, it is a deduction to your taxable income, and will instead be taxed when you withdraw the money in retirement.
What Happens to Remaining RRSP Contribution Room?
Remaining RRSP contributions from the previous year roll over to this year. That means if you didn’t quite manage to maximize your contributions, you can still catch up. Be sure to log onto your CRA My Account, prior to the contribution deadline, to confirm your available amount of room.
Do I Need to Report My Contribution Room?
Yes, when you file your taxes you will need to report your RRSP contribution room. This is done for you when you use TurboTax to complete your returns, year or year. The carry-forward amount is brought directly into your current return from the previous year; or, you can also find it on your Notice of Assessment from the previous tax year. This information is reported on Schedule 7 of your tax return.
What If I Have RRSP Contributions that I did not report?
If you’ve already filed your tax return and did not report some of the RRSP contributions you made in the tax-year, your remaining contribution room will be incorrect. You will need to file an adjustment with the CRA as soon as possible to correct your mistake and make sure that all of your RRSP contributions are accounted for in the appropriate tax year they were made.
You can avoid mistakes like this in the future by using TurboTax that automatically reduces your taxable income by how much you contribute to your RRSPs.
Where Can I Find My Remaining Contribution Room Balance?
If you’ve filed your tax returns, you will have a record of the remaining RRSP contribution room that you have saved up. Your last Notice of Assessment should have a RRSP Deduction Limit Statement which explains how much contribution room you have remaining last year and in previous years.
If you don’t have a copy of your Notice of Assessment, you can also find the details about your contribution limit on your CRA My Account. If you’ve previously registered for an account, all you need to do is sign in and find the section called “RRSP and TFSA”; your remaining limits for both investment vehicles will be found there.
If you still have contribution room available, and could use the tax deferral this tax-year, you have until Monday, March 2, 2020, to use it and have it count as contributions for the 2019 tax year.