UNITING FAMILIES WITH THEIR GOALS
UNITING FAMILIES WITH THEIR GOALS
We all know what an RRSP is. RRSP is a registered retirement savings plan which allows the taxpayer to exclude their annual RRSP contributions from their income for two specific purposes. Firstly, eligible contributions may be deducted up to the taxpayer’s personal deduction limit; a deduction may also be carried forward. Secondly, the RRSP contributed amounts will grow tax-deferred while held in the plan. Withdrawals are generally taxable. The RRSP must mature by the end of the year its holder turns 71; this is not a mandatory retirement age. Yet many are confused by the RRSP deduction limit and how it is calculated. First thing first lets discuss what constitutes a RRSP deduction limit or contribution room.
Updated September 2026: The examples below concern 2023–2024. The annual RRSP dollar limit is $32,490 for 2025 and $33,810 for 2026. Your personal limit depends on your circumstances; consult your notice of assessment.
Canada Revenue Agency defines it as follows:
The amount that you can contribute to your RRSP, PRPP (in addition to your employer’s contributions), or SPP
The amount that you can contribute to your spouse or common-law partner’s RRSP or SPP
The maximum you can deduct on your tax return, reducing your tax for that year
The annual deduction limit is calculated by the CRA as follows:
Your unused deduction room at the end of the previous year (as per Notice of Assessment), PLUS (+)
The lesser of any of the following amounts:
Maximum deduction limit for the tax year ($29,210 for 2022, $30,780 for 2023)
18% of earned income in the previous year, PLUS (+)
Less the previous year’s pension adjustment; plus any pension adjustment reversal, minus (-)
Net past service pension adjustment
Let’s look at few examples. Josh earned $100,000 in 2023 and had $20,000 contribution room for 2023 as per his 2022 Notice of Assessment. He contributed $15,000 to his RRSP in 2023. How much is his contribution room for 2024? His contribution room will be $23,000 which is calculated as follows: (100,000 x 18%) + (20,000-15,000). Now lets assume Josh earned $175,000 for the year. How will that affect his deduction limit? For 2024, 18% of $175,000 is $31,500, below that year’s $31,560 annual cap. Adding the $5,000 unused room gives $36,500, assuming no pension or other adjustments.
A common question asked by many: So what will happen if I contribute more than my limit? CRA will charge a 1% penalty per month on the amounts that exceeds your deduction limit by $2000. Lets assume you contributed $10,000 in excess of your contribution room. The CRA will charge you a 1% monthly penalty on the $8000 (10,000-2,000) or $80 per month.
The RRSP contribution deadline for the 2023 tax year is February 29, 2024. Contributions made after that date cannot be deducted for 2023; they may qualify for a later year, subject to available room.
Source: CRA annual limits.