What Is a Registered Retirement Savings Plan (RRSP) Deduction Limit?
The registered retirement savings plan (RRSP) deduction limit is the maximum sum that Canada allows its taxpayers to deduct from their income when calculating tax liability. The registered retirement savings plan deduction limit, or RRSP deduction limit, is set by the Canada Revenue Agency (CRA) The sum of contributions made to a taxpayer's personal RRSP and their spouse's or common-law partner's RRSP cannot exceed the RRSP deduction limit or taxes will be imposed on the excess contribution amounts.
- The registered retirement savings plan (RRSP) deduction limit refers to the most that a Canadian taxpayer can deduct from pre-tax retirement savings on their income taxes.
- Money is contributed on a pre-tax basis to an RRSP and/or spousal RRSP.
- This maximum is set each year by the CRA and can be found on taxpayer form T1028.
Understanding the Registered Retirement Savings Plan Deduction Limit
In order to arrive at a taxpayer's contribution limit, the CRA calculates the taxpayer's maximum contribution earned for the year, according to his or her annual income. The agency then deducts transfers of certain qualifying income made to the taxpayer's RRSP throughout the year.
Finally, the CRA calculates for pension adjustments using previous service pension adjustments, then adds back pension adjustment reversals and carries forward any unused RRSP deductions that were not used in previous years. Deduction limits are shown on each Canadian taxpayer's personal Notice of Assessment.
RRSP Deduction Limit: How to Find It
Canadian taxpayers can find their registered retirement savings plan (RRSP)/pooled registered savings plan (PRPP) deduction limit (often called their "contribution room") in the following ways:
- From Form T1028
- Online at My Account for Individuals
- The MyCRA mobile app
- Tax Information Phone Services (TIPS)
- On the RRSP Deduction Limit Statement on a taxpayer's latest assessment or reassessment notice
RRSP Deduction Limit: Claiming Deductions
Deductions may be entered on line 208 of the income tax and benefit return under the following guidelines provided by the CRA.
- The amount of RRSP contributions that you can deduct is based on your annual RRSP deduction limit, which appears on your latest notice of assessment or notice of reassessment, or on a T1028.
- You can also deduct amounts for certain income you transfer to your RRSP. Your RRSP deduction limit is not reduced by these amounts. For more information on transfers, see Chapter 6 – Transfers to registered plans or funds and annuities. Amounts transferred in for certain other types of retirement plans will not be taxable to you.
- Any income you earn in your RRSP is usually exempt from tax for the time the funds remain in the plan. However, you cannot claim a deduction for capital losses within your RRSP.
- You cannot claim a deduction for amounts that you pay for administration services for an RRSP. Also, you cannot deduct brokerage fees charged to buy and dispose of securities within a trusteed RRSP.
Interest on money borrowed to contribute to an RRSP may not be deducted. There may be changes in RRSP deduction limits and what is deductible in any given year, so taxpayers should check the CRA periodically. For example, contributions to a spouse's or common-law partner's RRSP or SPP have specific deductibility rules, as do contributions made to a Home Buyer's Plan (HBP) and a Lifelong Learning Plan (LLP). In most cases, the CRA will inform a taxpayer of any changed in their RRSP deduction limit.