RRSP Deduction Limit is your unused deduction room at the end of the preceding year which is calculated by the Canada Revenue Agency.
How is your RRSP deduction limit determined?
The Canada Revenue Agency generally calculates your RRSP deduction limit as follows:
- your unused deduction 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 (the annual limit is $27,830)
- That exceeds one of the following items:
- your pension adjustments (PA)
- a prescribed amount
Plus
- your pension adjustments reversal (PAR)
Minus
- your net past service pension adjustment (PSPA)
If you want to calculate your RRSP deduction limit yourself, see chart 3 of Guide T4040, RRSPs and Other Registered Plans for Retirement.
Who can contribute to a RRSP, PRPP, or SPP?
Generally, you can contribute to your RRSP, PRPP, or SPP:
- until December 31st of the year you turn 71 years of age
- when you have available RRSP deduction limit room
You can contribute to your spouse’s or common-law partner’s RRSP or SPP until December 31st of the year that they turn 71 years of age.
What is the deadline to contribute to a RRSP, PRPP, or SPP for the purpose of claiming a deduction on your return?
Contributions made to your RRSP, PRPP or SPP or your spouse’s RRSP or SPP from March 3, to March 1, qualify.
What if you contribute more than your RRSP deduction limit?
Generally, you have to pay a tax of 1 percent per month on your contributions that exceed your RRSP deduction limit by more than $2,000.
What RRSP, PRPP, or SPP contributions can you deduct on your tax return?
You can claim a deduction for:
- contributions you made to your RRSP, PRPP or SPP
- contributions you made to your spouse’s or common-law partner’s RRSP or SPP
- your unused RRSP, PRPP or SPP contributions from a previous year
You cannot claim a deduction for:
- amounts you pay for administration services for an RRSP
- brokerage fees charged to buy and sell within a trusteed RRSP
- the interest you paid on money you borrowed to contribute to an RRSP, PRPP, or SPP
- any capital losses within your RRSP
- employer contributions to your PRPP