RRSP Contribution Limit Guide for Canadians

So you're looking to contribute to your Registered Retirement Savings Plan (RRSP) in Canada? The good news is that there's a limit to how much you can contribute each year, which is set by the government.

In 2022, the RRSP contribution limit for Canadians is 18% of your earned income, up to a maximum of $29,210. This means that if you earned $100,000 in 2022, your RRSP contribution limit would be $18,000.

You can contribute to your RRSP at any time during the year, but you'll need to file your tax return to claim the deductions.

RRSP contribution limits can be a bit confusing, but don't worry, I've got you covered.

The RRSP contribution limit is 18% of your earned income for the previous year, up to a maximum of $32,490 for 2025. This is the most you can contribute to your RRSP each year.

You can find your unused RRSP contribution room by looking it up on the CRA website or checking your most recent tax forms. This will give you an idea of how much you can contribute to your RRSP in the current year.

Any contributions from previous years that haven't been maxed out can be used in the present, so if you've historically contributed less than your limit, you can add those leftover funds onto whatever you're contributing in the future.

Here are the key dates to remember:

You can contribute to an RRSP until Dec. 31 of the year you turn 71 years-of-age, so you have plenty of time to make the most of your RRSP contribution limit.

To start the RRSP deduction process, you'll need to determine your contribution limit, which can be found by filling out Form T1028 or by checking the annual limit for your tax year, which is C$31,560 for 2024 and C$32,490 for 2025.

You can contribute less than the allowable maximum, but it's generally in your best interest to save the maximum to minimize your taxable income.

The financial institution where you set up your RRSP will advise you on the types of RRSPs and investments available.

To claim your RRSP contributions on your income tax return, you'll need a receipt from the financial institution, which should show your name as the contributor and your spouse's name or common-law partner's name as the annuitant if you contributed to their RRSP.

Deduct your contributions on line 20800 – RRSP deduction of your income tax return, and attach the receipt(s) if you file a paper return.

Here are the steps to follow:

You can pay less tax now by contributing to an RRSP, which can be a huge relief for your wallet.

Paying no tax on the growth of your investments until you withdraw the money is a significant tax benefit of RRSPs.

This means you can keep more of your hard-earned money, which can be put towards other important goals or expenses.

Here are some specific tax benefits of contributing to an RRSP:

If you're looking to invest in an RRSP, you've got a wide range of options to choose from.

You can invest in equities, which can take the form of a mutual fund, index fund, exchange-traded fund (ETF), or individual stocks if you're knowledgeable and confident in your ability to pick them.

GICs are another option, offering a fixed interest rate and government insurance, making them a safe bet for risk-averse investors.

Bonds are also available, which are essentially loans to companies or governments, and can pay varying interest rates depending on the borrower's financial health.

Mutual funds are a popular choice, offering a diversified portfolio of investments.

You can also consider savings accounts, mortgage loans, income trusts, foreign currency, and labour-sponsored funds.

Here are some RRSP investment options to consider:

Managing your RRSP effectively is crucial to making the most of its benefits. An RRSP is the foundation of retirement funding for many Canadians, helping you save for your future.

You can pay less tax now by contributing to an RRSP, which means you'll have more money in your pocket to tackle other expenses. By reducing your taxable income, you'll also lower your tax bill.

One of the key advantages of an RRSP is that it allows you to pay no tax on the growth of your investments until you withdraw the money. This means your savings can grow faster over time.

If you're looking to buy your first home or fund your education, an RRSP can be a great resource. Consider using your RRSP as a source of funds for these important milestones.

You can use your RRSP to withdraw money for a first-time home purchase or education expenses, but be aware that you'll need to repay the amount borrowed, with interest, over a set period.

You can pay less tax now by contributing to an RRSP, as it allows you to reduce your taxable income for the year.

This can be a significant advantage, especially for those who are in higher tax brackets.

By contributing to an RRSP, you can also pay no tax on the growth of your investments until you withdraw the money.

This means that your investments can grow tax-free, allowing you to keep more of your hard-earned savings.

Here are some key tax implications to consider:

If you over-contribute to your RRSP, you'll likely get off easy if the excess is $2,000 or less.

The CRA won't penalize you, but those extra funds won't be tax-deductible.

In cases of over-contribution by more than $2,000, you'll receive a warning letter from the government advising you to get rid of the offending amount.

If you fail to do this, you'll be penalized 1% of the extra money each month you allow it to stay in the account.

And, if you fail to pay those penalties on time, you'll also get hit with much-higher late fees, compounding what you owe.

However, if you made an innocent mistake, you can always apply to have the penalties waived.

Sometimes it's smarter to stall making your maximum RRSP contribution. This strategy is called a postponed contribution.

If you just started a job mid-year, next year you'll be taxed on a whole year's salary. However, this year, your income will be lower than usual.

You can save some of your new pay right away but using the maximum RRSP contribution next year could save you more tax.