If you have been putting off opening a Registered Retirement Savings Plan (RRSP) because you did not have the extra money, or just have not made contributing to your RRSP a priority, there is some good news! Your unused contribution room has been carrying forward for you, which means you should have a considerable amount of space to contribute to. When you are ready to start making contributions to your RRSP, all you have to do is file your personal income tax return and look at your “RRSP Deduction Limit” to see just how much room you have to catch-up.
Your RRSP deduction limit is the amount of RRSP/PRPP deductions that you are able to deduct from your tax return (reduce your net income) for the next tax year.
It is a very good idea to keep track of your RRSP deduction limit because you want to contribute the amount that you can without exceeding the threshold, because the Canada Revenue Agency (CRA) charges penalties for over-contributing to RRSP’s by mistake.
Calculate RRSP Deduction Limit
The CRA calculates your deduction limit for you, based on your:
- Income earned in the previous year;
- Any pension adjustments, past service pension adjustments or pension adjustment reversals
- Used RRSP deduction room at the end of the previous year
Your deduction limit is 18% of your earned income, to a maximum value for the year.
The maximum RRSP contribution amount changes each year; for the most current amount, click on the CRA link here.
Unused contributions are carried forward each year, so if you did not completely fill up your RRSP (or maximize your RRSP) last year, the unused amounts are added to this year’s limit.
Where To Find My RRSP Deduction Limit?
Your RRSP deduction limit, also referred to as your “contribution room” can be found;
- On your Notice of Assessment; Your deduction limit appears on line (A)
- In your CRA My Account
- By calling the CRA’s Tax Information Phone Service (TIPS)
- On Form T1028, if CRA has sent you one due to changes to your RRSP deduction limit since your last assessment