Determining your RRSP contribution limit

Contributing the maximum allowable amount increases your overall savings

The first step in making your RRSP savings grow is to start contributing early. This gives your investment a longer time horizon to earn you tax-sheltered income. The next critical factor is maximizing your contribution limit if you can to make your money work as hard as possible over the years through compound interest.

Your allowable RRSP contribution is the lower of the following:

• 18% of your earned income from the previous year
• The maximum annual contribution limit for the taxation year
• The remaining limit after any company-sponsored pension plan contributions, plus, your unused contribution room.

Find your maximum allowable contribution limit

The easiest way to find your contribution room is to check your Notice of Assessment or Notice of Reassessment for the previous tax year.

If you don’t have that handy, you can call the automated Tax Information Phone Service (T.I.P.S.) at 1.800.267.6999, or the individual income tax enquiries line at 1.800.959.8281. You will be asked for your Social Insurance Number, your date of birth, and the total income you reported on line 150 of your income tax return for the previous year.

You can also use the online CRA My Account service. Before you can access the service for the first time, you must register. You can then sign in and access your RRSP Deduction Limit Statement online.

Contributing more than the maximum allowed

You can contribute up to $2,000 more than the maximum without penalty. This is called the over-contribution limit. If you exceed this over-contribution limit, you will be subject to a 1% monthly penalty tax on the amount above $2,000 (unless the exceeding amount is tax deductible on your previous year's tax return).

Maximizing RRSP deductions from past years

If you haven't claimed your maximum RRSP deduction in years past you can carry forward any unused deduction room indefinitely. This is calculated each year by the CRA and can be found on your Notice of Assessment.

Contribute early

Contribute your maximum amount as early in the year as possible; you'll earn additional interest on your investments throughout the year.

If you can, contribute the maximum allowable to your RRSP to take advantage of the tax benefits and build your savings. If you don't have cash accessible, consider taking out an RRSP Loan, and use your tax refund to reduce your borrowed RRSP debt.

Talk to us

Your financial advisor can help you create an RRSP strategy that works for you. Get in touch by calling us us at 604.982.8000 (toll-free 1.888.713.6728), send us a message, or visit a local branch.