How Much Can I Contribute to My RRSP?

How Much Can I Contribute to My RRSP?

The 2024 RRSP contribution deadline is coming up, and just like every year, people are wondering how much they can contribute and how to go about it. In this blog, we’ll go over the most common questions — from when to how much you can contribute — we receive from workers.  

What is the RRSP Deadline?  

This year, the RRSP contribution deadline is February 29, 2024 Anything contributed after that date is considered a contribution for the 2023 tax year.  

Are RRSP Contributions Tax Free? 

Registered Retirement Savings Plans are a tax-deferred savings tool designed to make saving for retirement easier. RRSP contributions are tax exempt, whereas RRSP withdrawals are not – an RRSP allows you to avoid a higher tax bill now, in favour of a smaller tax bill in your low earning retirement years.  

Are GRSP Employer Contributions Tax Free?  

Group RSPs are set up by your employer and may come with an employer contribution. Employer contributions come in all sorts of shapes and sizes, including fixed yearly contributions, contribution matches, and contributions up to a percentage of your salary with or without bonuses. Beyond the employer contribution, there are no functional differences between RRSPs and GRSPs. 

Employer GRSP contributions are not tax-free, but they are pre-tax. While contributions go into your GRSP without source deductions (that is, tax withheld on your paycheque), they are taxable upon withdrawal.  

What Does Available Room Mean?  

When we talk about “available room”, we’re referring to how much you can put into your RRSP this year. RRSPs have an annual contribution limit and you are responsible for keeping an eye on your contributions, including employer matches. Most Canadians contribute to their RRSPs on a monthly basis, and their available room shrinks as the year goes on. Should you choose to contribute a year-end or quarterly bonus just before the RRSP deadline, ensure that you will not exceed your room available.  

Employer GRSP contributions are not tax-free, but they are pre-tax. While contributions go into your GRSP without source deductions (that is, tax withheld on your paycheque), they are taxable upon withdrawal.  

How Do I Carry Over Contribution Room? 

Unused contribution room carries over to the following year by default and does not expire. If you’ve never contributed to an RRSP, you have far more available than someone who makes the same salary as you but contributes every year. However, the longer you wait to begin saving for retirement, the less likely are you to catch up to those who have been contributing. 

What is a Contribution Limit?  

Contribution limits are unique to you and depend on your total yearly earnings and your previous RRSP contributions. Your limit is calculated by taking the annual RRSP deduction limit and adding your unused contribution room carried over from previous years.  

  • The 2023 deduction limit is 18% of your earnings in the past year, or $30,780, whichever is less.  
  • That makes your 2023 contribution limit the above deduction limit, plus your carried over contribution room.  

What is My Contribution Limit?  

Your Notice of Assessment is the summary that the CRA provides to you after you’ve completed filing your taxes. If you have a My CRA account, you can find your most recent notice of assessment here. On your Notice, look for your Available Contribution Limit – this is your personal contribution limit for 2023 as assessed by the CRA.  

What if I Go Over My Contribution Limit?  

Only you are responsible for tracking your RRSP contribution room, and you can be fined if you exceed. This is because only you, not your employer or your bank, have the full picture of your current earnings and contributions.  

If you over contribute to your RRSP by $2000 or more and don’t withdraw the excess, you will be required to pay a tax of 1% per month on your excess. Use form T1-OVP to declare your over-contribution and they pay your fine  

If you file form T1-OVP or pay late, you will be assessed an additional penalty of 5% of your balance owing, 1% of your balance owing every month late to a maximum of 12 months, and interest charges starting on the 91st day of the following year.  

The CRA may assess additional penalties if you have a recent history of late filing T1-OVPs and have previously been assessed for late penalties.  

That means that the more you put off correcting an excess contribution, the worse your situation becomes. 

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