Registered Retirement Savings Plan Deduction Limit - RRSP Deduction Limit
DEFINITION of 'Registered Retirement Savings Plan Deduction Limit - RRSP Deduction Limit'
The maximum amount that the Canada Revenue Agency (CRA) allows a taxpayer to deduct from his or her personal income when calculating tax liability. The sum of contributions made to a taxpayer's personal RRSP and his or her spouse's or common-law partner's RRSP must be lower than the RRSP deduction limit or withholding taxes will be imposed on the coverage.
BREAKING DOWN 'Registered Retirement Savings Plan Deduction Limit - RRSP Deduction Limit'
In order to arrive at this contribution limit, the CRA calculates the taxpayer's maximum contribution earned for the year according to his or her annual income. It then deduct transfers of certain qualifying income made to the taxpayer's RRSP throughout the year. Finally, the CRA calculates for pension adjustments using past service pension adjustments and adds back pension adjustment reversals and carries forward any unused RRSP deductions that were not used in previous years.
Deduction limits are shown on your personal Notice of Assessment.
To learn more about RRSPs, check out How are Registered Retirement Saving Plans (RRSPs) taxed?