Guide to RRSP Contribution Limits and Deductions - NerdWallet Canada (2024)

Registered Retirement Savings Plan (RRSP) contributions are tax deductible and a great way to build your retirement savings. Each year the RRSP contribution limit caps at 18% of your previous year’s reported income, up to a maximum limit set by the government. For 2024, the annual contribution limit is $31,560.

However, you’ll need to be aware of plenty of rules to ensure you make the most of the RRSP benefits and don’t incur penalty fees.

How do I make an RRSP contribution?

You can make RRSP contributions by opening an RRSP at a financial institution’s branch location. You can also use online banking to open a new RRSP and transfer funds from your chequing or savings account, or make contributions to an existing account.

Types of RRSP investments

Most banks and credit unions offer a variety of investment options to hold within your RRSP, including:

• Stocks.
• Bonds.
• Mutual funds.
• Guaranteed investment certificates.

When considering these options, you may want to get advice from your bank’s investment advisor or contact a professional financial advisor.

You can contribute a lump sum to your RRSP once a year or set up regular automatic deposits, such as after you receive each paycheque. Either way, be sure your contribution is within the limits set by the Canada Revenue Agency (CRA).

What is the RRSP contribution limit?

The RRSP contribution limit is a specific amount you’re allowed to contribute to your RRSP every year: Typically, 18% of your total income earned in the previous year, up to a set maximum limit. The RRSP contribution limit for 2024 is $31,560 (this number changes annually — it was $30,780 for 2023), plus any unused contribution amounts from previous years. This combined amount is sometimes called “contribution room.”

Nerdy Tip: The RRSP contribution limit is sometimes referred to as the RRSP deduction limit because it’s the maximum amount you can claim as a deduction on your tax return.

Note that opening a spousal RRSP does not give you additional contribution room. If you add funds to a spousal RRSP in your partner’s name, those contributions count toward the contributor’s overall limit — not the spouse’s limit.

How to calculate the RRSP contribution limit

You can find your RRSP contribution limit on your latest notice of assessment from the CRA. It also includes the information on the RRSP contributions you sent with your previous tax return, which the CRA used to calculate your deduction limit. If there are any changes since the last assessment, CRA will send you an updated RRSP limit on Form T1028.

You can also log into CRA’s My Account online service to see your RRSP deduction limit on your account overview. This limit includes any unused contribution room from previous years.

If you prefer, you can call the CRA at 1-800-959-8281 to ask for your RRSP deduction limit.

» See our picks: The best high-interest RRSPs in Canada

RRSP historical contribution limits

Are RRSP contributions tax-deductible?

Yes. The amount that you contribute to your RRSP by the annual deadline can be claimed as a deduction from your taxable income, which essentially means you’ll be taxed on a lower income. The RRSP contribution deadline is typically around March 1. For the 2023 tax year, the deadline was February 29, 2024.

Now, what many Canadian taxpayers don’t realize is that you don’t have to deduct all those contributions in the same year. You can choose to carry forward some or all your RRSP contribution deductions into future years.

Generally speaking, the more money you make — and the higher your tax bracket — the more helpful these tax deductions are. So, if you don’t currently pay a high rate of tax, it might be in your best interest to save some or all of your contribution deductions for a future year when you are making more money and paying a higher overall tax rate.

If you use this strategy, you’ll still need to claim the contribution amount on your annual tax return. The CRA will take note of any unused contributions and will list the non-deducted amount on your notice of assessment as available to carry forward to a future year. You can also keep track of the amounts yourself using Schedule 7.

What happens if I over contribute to my RRSP?

If you contribute more than your limit to your RRSP (or your spousal RRSP), it’s called an excess contribution. If you exceed your contribution limit by more than $2,000, you’ll be taxed 1% of the excess contribution per month.

However, if you withdraw the excess amount before the end of the month in which you made the contribution, the tax will be waived. It will also be waived if you contributed to a qualifying group plan.

What if I can’t afford to max out my RRSP contribution?

That’s okay. You don’t have to contribute up to the limit every year, and you don’t lose your contribution room if you can’t use it in any given year. That amount will be carried forward to the next year.

For example, let’s say you have $31,560 in contribution room (the 2024 RRSP contribution limit). If you contribute $10,000 before this year’s deadline, the remaining $21,560 will be added to your annual contribution limit for the following year. Your contribution room will continue to grow until you max out your contributions or until December 31 of the year when you turn 71, whichever comes first.