RRSP Contribution Limit and Deadline for 2023
How an RRSP Contribution Affects Your Income Tax
When contributing to an RRSP (registered retirement savings plan) you can reduce your taxable income while building a retirement fund. The condition for opening and contributing to an RRSP is you must have employment income, have the allowable contribution room and file a tax return. There is no minimum age limit for opening an RRSP.
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What Are The Benefits of Making Rrsp Contributions:
- Your contributions are tax-deductible from your taxable income on your yearly tax return.
- Any investments inside an RRSP are not taxed until withdrawal.
- Investing in an RRSP is primarily used to save for retirement.
- An RRSP can also be used to assist with the down payment on your home or to fund an education plan.
- You can also contribute to a Spousal RRSP whereby couples can split their retirement income for income tax purposes.
When Is the Contribution Deadline for Your 2022 RRSP?
The RRSP contribution deadline for the 2022 tax year is March 1, 2023.
How is your 2022 RRSP deduction limit determined?
Your RRSP contribution limit, referred to as your “deduction limit”, is the maximum amount you can contribute to your personal or a Spousal RRSP in a given year.
The “deduction limit” amount, including any unused contributions from previous years, can be found on the bottom of your Canada Revenue Agency (CRA) Notice of Assessment or Reassessment from the previous tax year (2021).
The Canada Revenue Agency (CRA) generally calculates your RRSP deduction limit as follows:
- Your unused RRSP deduction room at the end of the preceding year
- The lesser of the two following items:
- 18% of your earned income in the previous year
- The annual RRSP limit (for 2022, the annual limit is $29,210)
- That exceeds one of the following items:
- Your pension adjustment (PA)
- Your prescribed amount for connected persons
- Your pension adjustments reversal (PAR)
- Your net past service pension adjustment (PSPA)
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. Your excess contributions must be reported to the Canada Revenue Agency (CRA) within 90 days after the last day of the tax year when you over-contributed. Reports filed after that deadline may be subject to an additional penalty equal to 5 percent of the taxes you owe plus an extra 1 percent for every month, to a maximum of 12 months.
What RRSP, PRPP (Pooled Registered Pension Plan), or SPP (Specified Pension Plan) Contributions Can You Deduct on Your Income Tax and Benefit 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
What Is Not Considered an RRSP, PRPP, or SPP Contribution?
The following are not considered to be an RRSP, PRPP, or SPP contribution for the purpose of claiming a deduction on your tax return. Find out the special rules that apply if you:
- Transfer amounts to your RRSP, PRPP, and SPP
- Repay funds that you withdrew under the Home Buyers’ Plan
- Repay funds that you withdrew under the Lifelong Learning Plan
Amounts you transfer directly to your RRSP, PRPP, and SPP do not affect your RRSP deduction limit. However, you may need to include an amount in income and claim an offsetting deduction.
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