RRSP Quick Facts 2018: RRSP deadlines, contribution limits, and more

It's that time again when Canadians go out and buy RRSPs for the past year. Here are some of the rules and regulations for RRSPs so you can make good RRSP decisions this year.

Who is eligible to buy RRSPs?

Anyone who has earned income, has a social insurance number and has filed a tax return can contribute to an RRSP up until December 31 of the year they turn 71. After this age if you continue to have earned income, you can contribute to a Spousal RRSP up until December 31 of the year your spouse turns 71.

Maximum contribution limits

ChecklistYour allowable RRSP contribution for the current year is the lower of:

  • 18% of your earned income from the previous year, or
  • The maximum annual contribution limit (See chart) for the taxation year less
  • Any company sponsored pension plan contributions (PA – pension adjustment)
Tax YearIncome fromRRSP Maximum Limit
20182017$26,230
20172016$26,010
20162015$25,370
20152014$24,930
20142013$24,270
20132012$23,820
20122011$22,970
20112010$22,450
20102009$22,000
20092008$21,000

Note:

  • A Past Service Pension Adjustment (PSPA) arises in rare instances where a member of a pension plan has benefits for a post-1989 year of service upgraded retroactively.
  • Pension Adjustment (PA) represents the value of any pension benefits accruing from participation in a registered pension plan or deferred profit sharing plan.Notes

Earned income

For most people, earned income for RRSP purposes is the amount in box 14 of their T4 slips.

Earned income also includes self-employed net income, CPP/QPP disability payments and net rental income.

Income sources that do not qualify as earned income include investment income, pensions (including DPSP, RRIF, OAS, and CPP/QPP income), retiring allowances, death benefits, taxable capital gains and limited-partnership income.

Revenue Canada's Form T1023 (Calculation of Earned Income) outlines all sources of earned income.

Obtaining your contribution limit

After processing your tax return, Revenue Canada sends a Notice of Assessment, which includes your next years' contribution limit. This document also shows your unused contribution room.

Or you can call your local Tax Information Phone Systems (TIPS) number, which is found in the blue pages of your phone book under Tax Services. Be sure to have your SIN and previous tax return ready.

Contributing securities

You don't necessarily need cash to make an RRSP contribution. You can contribute (in kind) a security you already own outside your RRSP.

The “in kind' contribution is equal to the fair market value of the security when contributed. The security is deemed to have been disposed of at time of contribution. Be aware that this can have tax consequences.

Unused/carry forward contribution room

RRSP contribution room accumulated after 1990 can be carried forward to Subsequent years. If you are unable to maximize your RRSP contribution this year, you are allowed to make up the difference in later years.

Over contribution

The $2,000 lifetime over contribution allowance applies to those who have reached age 18 or older.

Your over contribution can be used as a deduction in future years. ($2,000 over contribution this year an be used as part of your deduction in the following year.

Any amount in excess of $2,000 will be charged a penalty of 1% per month.

Spousal RRSP

All or a portion of your RRSP contribution can be made to an RRSP in your spouses name.

As the contributor, you get the deduction, but your spouse is the owner of the plan. This includes common-law spouse as defined by Revenue Canada

There can be tax implications when spousal funds are withdrawn.

RRSP deadline to receive a tax deduction

The deadline for a RRSP tax contribution is always 60 days after the end of the previous year to be eligible for a deduction for the 2017 tax year. This year the RRSP deadline is March 1, 2018. Consult with your financial institutions about how they are able to accommodate deadlines.

Contributions made in the first 60 days of the year can be applied against the previous taxation year or in any subsequent year.

If you are turning 71, this is the last year in which you may contribute to your RRSP. You must convert your RRSP by December 31 in the year you turn 71.

What is the Home Buyers' Plan?

With the Home Buyers' Plan (HBP), you can, take up to $25,000 out of your RRSP to put towards the down payment on your first home and you won't be taxed on it. However, you do have to pay it back into your RRSP over the next 15 years.

Lifelong Learning Plan (LLP)

With the Lifelong Learning Plan (LLP), you can withdraw up to $10,000 a year, or up to $20,000 in total each time you participate in the LLP to help pay for your education. All you have to do is repay at least 10% per year for up to ten years.

Participants must start to make repayments two years after their last eligible withdrawal, or five years after the first withdrawal, depending on which due date comes first. Amounts withdrawn must be repaid within 10 years.

Written by Jim Yih

Jim Yih is a Fee Only Advisor, Best Selling Author, and Financial Speaker on wealth, retirement and personal finance. Currently, Jim specializes in putting Financial Education programs into the workplace. For more information you can follow him on Twitter @JimYih or visit his other websites JimYih.com and Clearpoint Benefit Solutions.

43 Responses to RRSP Quick Facts 2018: RRSP deadlines, contribution limits, and more

  1. Nice article! Correct me if I am wrong please, but in reading this it looks like you can’t contribute more than the RRSP maximum limit even if you have more contribution room that has carried over from previous years. Am I right in this understanding?

    • I believe you can contribute any carried over room from previous years as well. So if your total contribution room is $50,000 as of 2015, then that’s how much you can contribute this year without over contributing.

    • But you probably shouldn’t, as you will not achieve any tax savings by doing so (you won’t owe any tax this year because you have no income, so the RRSP investment will not save you any tax). Tax savings in the year of purchase is the primary reason you would invest in your RRSP. You would be far better off this year to put whatever money you wish to save into a TFSA account, where it can grow tax free just as it does in an RRSP. You will thereby save the RRSP contribution room for a future year when you do have taxable income (when you have taxable income, the amount of the RRSP investment reduces that income and thereby reduces the tax you pay). You can put the money in the TFSA this year and simply transfer into your RRSP account in a later year when it will be advantageous (i.e. a year when you have taxable income. People often overlook the particular benefits of TFSA vs RRSP in some circumstances.

      • I don’t have employment income, but I have income from a pension and CPP, so I do pay income tax. Thanks for the reply.

  2. Jim,

    I have a bone to pick about this article, about a misconception about RRSPs.

    Just like one doesn’t buy a savings account, one cannot buy an RRSP. Just like you can’t buy a TFSA or an RESP.

    It’s a type of financial account. You can only open one (or more than one) or close it. But you can’t buy it.

    You open an RRSP then contribute or deposit money in the RRSP to then buy stocks, bonds, mutual funds, closed end funds, or even just deposit money there.

  3. Husband in long term disability, I am unable to work so will have zero income. Can I cash in a spousal rrsp to pay mortgage? Our mortgage is 13,000 and we have $14,000 in rrsp. We would like to pay mortgage off.

    • In generation, You can withdraw your rssp funds anytime.
      The amount will be added to your income for the year and there will be withholding tax.

      Withdrawal Amount % Federal Tax Withheld
      From $0 to $5,000 10% (5% in Quebec)
      From $5,001 to $15,000 20% (10% in Quebec)
      Greater than $15,000 30% (15% in Quebec)

      You may get some of this withholding tax back when u file your tax return for the year.

      • Ws,

        The amounts stated are the gross amounts withdrawn; the tax percentage will be applied on that gross amount and you will receive the remainder.

        Note that these are cumulative amounts for the calendar year. If you withdraw three gross amounts of $5,000 you will be changed on the cumulative withdrawals. (It gets a little complicated as to how much tax is withheld – I did it once).

        Since GST/HST is applied on the withdrawal fees charged on each withdrawal, a litlle planning would be a good idea.

    • Karen,

      You need to find an expert on RRSPs.

      There are reams of rules about RRSPs. Therefore an expert will be hard to find because they can answer your questions but they may not offer other information that you have not brought up, since you’re not an expert and have not encountered the myriad situations than can occur after your RRSP actions.

      (Long sentence? RRSPs are extremely complicated and may hold multiple surprises because of all the subtle and obscure rules.)

      I have a question? Why would you want to do such a move?

    • This info from the CRA website.
      Your RRSP contributions must stay in the RRSP for at least 90 days before you can withdraw them under the HBP. If this is not the case, the contributions may not be deductible for any year.

  4. I’ve recently retired and got sevrance pay, bought some past entitlements to spruce up my DB pension & paid that with savings and part of an RRSP, etc; so its a complicated tax return this year, for me anyways and I want to have things done properly so there’s no comeback from CRA. Can you recommend anyone in the Montreal Quebec area that is highly familiar with the rulebook concerning my situation described above? I’ve looked at http://www.ats-accounting.ca/about-us/ and they even have a quote from you, Jim. Are they a reputable and trustworthy place to do business with?

    Thanks a bunch!

  5. Can a person have both a RRIF and an RRSP?

    I have converted my RRSP to a RRIF but there may be instances in the next few years (I’m 60) that I may want to contribute to an RRSP to get the tax break … can you leagally have both?

    • Yes, Monica

      From the article –

      Contributions made in the first 60 days of the year can be applied against the previous taxation year or in any subsequent year.

  6. RE: Definition of “Current Year” and
    “Maximum contribution limits:
    Your allowable RRSP contribution for the CURRENT YEAR is the **lower of**:

    ●18% of your earned income from the PREVIOUS YEAR (APPLES), AND
    ●the maximum annual contribution limit (See chart) for the taxation year (ORANGES) less … ”

    There appears to be an Apples & Oranges type of logic in the stated rules, meaning that in Jan of 2018 you know exactly what your T4 earnings were for the previous year 2017, but C.R.A. has not yet even processed your T4 slip yet, and instead printed on your Notice of Assessment for 2016 the contribution limit that it knows from the 2nd preceeding tax year 2016.

    Thus, the rule as stated does not sound logical and risks mixing up Apples and Oranges and causing a letter from C.R.A. with penalties and interest and requesting you to fill in a very complicated T1-OVP for overcontributing.

    In recent years I have been contributing to my RRSP in Jan/Feb of a year the applicable percent of the immediately preceding year’s earnings and got a letter from CRA asking me to do this terribly complicated OVP and asking me to prove the numbers for the last 20 years. Seriously annoying and maybe have to fork over thousands in penalties and interest not only for overcontributing but also for not filing an T1-OVP.

    I wish that the rules were more clearly stated.

  7. I have no taxable income. If I withdraw from rrsp’s would they use a different tax rate? Also, would this be considered income then on my 2018 taxation year?

  8. We made a real estate investment and made interest income on it. It would it be better for me to claim it as income instead of my husband as he makes a substantial amount of money (and also gets TAXED a substantial amount of money) BUT, can he claim the interest we pay on financing the investment as it is coming out of our account?

  9. Jim,

    Having gone through major issues with CRA for RSP over contribution (had to file T1-OVP for 5 consecutive years pay penalty, interest, fines and interest on fines.), i would like to share one important lesson learnt. ALL CONTRIBUTIONS made during the first 60 days will be used to calculate the contribution room of the previous calander year. You are right in that the amount can used in tax filing for the current or previous year, but contribution room is calculated for previous. So in my case I tend to contribute current years max amount during Jan because that gives your funds max growth period. For example in 2015 my RSP room is maxed out by Nov and for 2016 I made the max contribution of $25,370 in Jan hoping to include it in my 2016 filing. CRA calculates that you over contributed by $23,370 (25,370 -2000) and if you missed that you need to file your T1-OVP and pay 1% penalty tax and compound interest for late payment. It’s painful lesson.

  10. ADD-ON: THE AMOUNTS I CONTRIBUTED IN JAN/FEB I always deducted them in the same year i made the contribution to allow CRA to catch up their paperwork so I NEVER DEDUCTED THEM on the prior ie the “Tax Year” in question.

    So, amounts contributed in JAN/FEB 2017 I did not deduct on the tax return for 2016, and CRA for some reason shows them as a carry forward just because they had to be reported on the 2016 tax return.

    But how can they be considered a carry forward if the 2017 contributions were not claimed on the 2016 return. Also, since CRA should have the exact dates per the contribution slips that were also entered in the tax software they should have all the info they need to match their calculations. So either CRA wants me to prove my numbers because their systems do not catch the dates or … Hate to speculate who is the dumb one here, since it’s usually “Operator Error” when something buggers up …

    Back to the article, IMO we should not postulate a rule that leaves people open to a vast misinterpretation for words like “CURRENT YEAR”, PREVIOUS YEAR and TAX YEAR without a specific example.

    If I make a contribution in 2017 for 2017 then “current year” seems 2017, whereas if I make the same contribution in 2018 then “current year” seems 2018.

    • I discovered after filling up T1-OVPs and paying penalties that they use financial year – Mar 1st to Feb end for calculating CONTRIBUTION ROOM. So if you made a contribution during Feb 2018 it is taken into consideration towards contribution room if 2017. However for deducting in tax filing you can do it for the year 2018 or 2017. Not knowing this anomaly and making major portion of your contribution during the first 60 days when you have already topped up during previous calander year will result in hefty penalties.

  11. Where could I find more information regarding the CPP-Disability benefit being treated as ‘earned income’ for RRSP purposes. I have collected CPP-D for 7 years, but never knew that I could use it as earned income for RRSP purposes. Can I make RRSP contributions now and go back 7 years to reduce taxes paid? Thank you.

    • Hi again. I just want to add to my question above that the Turbo Tax program does not treat CPP-D payments [T4A(P), Box 16] as ‘earned income’.

      • see my post below in response to George’s comment.
        I found the list of items including disability income on a website authored by marcil-lavallee and appears to be lawyers in Quebec.

        I bet if you google you will come up with a brick load of info to answer your question Emma (nice name 🙂

  12. What does “Tax Year 2018” in the table mean?
    I thought we’re still in the “Tax Year 2017” land.
    At least, CRA caling it that way.

    • Presumably, 2018 Tax Year means 2018 Calendar year, so your combined ‘earned’ “Income from” 2017 ….>

      [For RRSP purposes, “earned income” includes

      Net income from employment,
      Net income from business, including from a partnership,
      Net rental income from real estate,
      Canada Pension Plan or Quebec Pension Plan disability pensions, and
      Spousal support payments include in your income;
      Minus:

      Losses from businesses and rental real estate, and
      Deductible spousal support paid by you.
      (There are certainly other components to earned income as well.)]

      <…. for purposes of calculating the RRSP contribution room, times 18% would come up to a limiting 26,230

  13. I need a help about understanding RRSP.. I am self employed and and contributed RRSP for a couple of years, last year my tax was 4k. some one suggested me to buy RRSP to lower down my tax payment,for 4k. Tax payment how much RRSP i should buy just to lower down my CRA payment? Any explanation is greatly appreciated. Thank you

  14. … and such limiting maximum 26,230 would be deductible in the 2018 Calendar/Tax Year, even if you <> and that’s the current beef I have with the rules per my earlier post <> and for which we would like to read a comment from our specialist Jim Yih, so IMHO EVEN IF WE pay this amount in 2018 before March 2nd and report that as a payment in the first 60 days of 2018 for our 2017 tax return WITHOUT however deducting such amount on our 2017 income tax return.

    • SO, I’M UPDATING my understanding on the RRSP contributions in the first 60 days: I read that the RRSP year is DIFFERENT from the regular CALENDAR tax year in that the RRSP YEAR runs from March 2nd for non-leap years to March 1st of the next year while still needing to be reported on the tax return of the year that just finished on December 31st. <> Unfortunately this rule is VERY POORLY described anywhere and it tricked me multiple times. I can say it’s like the SINKHOLE OF RRSPs and that there are INSUFFICIENT WARNINGS about its existence and insufficient fences around that sinkhole to warn good and loyal tax payers from falling into. I’LL FILE A COMPLAINT WITH THE MINISTER on that RRSP SINKHOLE.

  15. Let’s give praise EVERYONE! to our specialist Jim Yih for jumping through the hoops for creating such a wonderful website where we can congregate and help each other and venture an opinion for the better,

    THANK YOU JIM!,

    Chris and all the posters here.

  16. Under Earned Income you have the following “Income sources that do not qualify as earned income include investment income, pensions (including DPSP, RRIF, OAS, and CPP/QPP income), retiring allowances, death benefits, taxable capital gains and limited-partnership income.” What’s difference between earned income and investment income? Isn’t a dividend from a stock investment “earned” and subsequently taxed?

    • ‘Earned’ means more like you rolling up your sleeves and providing a service or selling goods where your labor is the source of the income whereas in investments the source of the income is an asset like a share that pays a dividend.

      Luckily net rental income is still counted as earned income despite that your real estate asset is the prime source of income whereas the secondary source of income is your skill in upkeeping the property, and finding new tenants.

      I think the government kind of bent the logic on real estate asset income for making it eligible for RRSP contribution room, perhaps in order to achieve some other purpose such as driving the economy from renovations or private ownership of real estate or to make people more self-sufficient in order to get them off the pension and guaranteed income support.

  17. Hi Eva, the best way to answer your question is to use any online netfiling program and fill in your numbers from last year, ie the numbers your tax preparer gave you a one page tax summary for, or call your tax preparer and ask him/her the same question because he/she has all your circumstances in his/her computer file.

  18. >> Here is my own Question to the RRSP geeks: When I turn 71, in December of that year, I can make a 1-month overcontribution with 1% penalty and need to file a T1-OVP, but I wonder: is there a limit to how much I can shove into the RRSP with the penalty? I read that the overcontribution will disappear by January 1st because the RRSP has morphed into an RRIF. So, If I’m prepared to pay a thousand dollars for the penalty, then at 1% penalty I could contribute 100k in the RRSP, have that rolled into a RIF in January, carry forward the unclaimed contribution until it’s used up by rental income (earned income) and have the money invested that much earlier and stretch out the RRIF payouts back to me over the same 20 years as if i were to contribute a smaller amount. I guess the whole benefit from making a 1-month overcontribution to my RRSP at that time would be to convert cash into an annuity, shelter the money away from greedy relatives until my death and nail down a bigger amount to go to my wife on my death sheltered away from probate. ——————————WHAT’S UR TAKE, RRSP GEEKS?

      • Your comment does not address my question:
        a.) “Is there a limit to how much I can shove into the RRSP with a 1 month 1% of overcontribution penalty?”

        and

        b.) where i said … “.. an annuity, shelter the money …” (meant to mean ‘inside the RRIF’ starting the January after the Dec overcontribution).

        Thanks for drawing my attention to the issue again. As more people comment I hope we can find the answer from the power of collective researching.

        I bet there are many ppl who have unclaimed and undeducted contributions rolled forward forever.

        Thanks to this board we are gonna find the answers, i hope 🙂

        • I’m not trying to answer your question, just point out a flaw in your logic. You said “carry forward the unclaimed contribution until it’s used up by rental income”, however it is my understanding that there is no unclaimed contribution on an over-contribution.

  19. If I move to Canada and I work during 2018, and make 100k. Am I able to contribution to an RRSP in January and February of 2019 and deduct that amount from my income?

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