The maximum RRSP contribution for 2024 has been set by the Canada Revenue Agency at $31,560. This limit is an increase from the previous year and allows you to contribute up to 18% of your earned income in 2023 up to this maximum amount.
In 2023, the maximum RRSP limit was $30,780.
It is essential to stay within the contribution limits to avoid penalties and taxes associated with over-contributing. That said, if you’ve under-contributed in previous years, you may have additional contribution room available.
Factors That Influence RRSP Contribution Room
Your RRSP contribution room is influenced by your previous year’s earned income, any pension adjustments (PAs), and your past RRSP contributions.
Also, contributions to Deferred Profit Sharing Plans (DPSPs) impact your limit.
How To Calculate Your Maximum RRSP Contribution for 2024
To calculate your limit, start with 18% of your 2023 earned income, subject to the maximum limit set by the CRA. Then, add any unused contribution room from previous years.
You can also check your Notice of Assessment from the CRA to see how much you can contribute for the year. If checking CRA MyAccount for an update, note that the numbers there may be off due to delays in reporting by financial institutions.
CRA Rules and RRSP Contribution Deadlines
The RRSP contribution deadline typically extends 60 days into the new year, allowing you to contribute for the previous tax year.
Contributions made within this time can be deducted from your taxable income for the previous year when filing your tax return.
RRSP Over-Contribution and Penalties
Should you exceed your RRSP limit by more than $2,000, penalties may apply.
The CRA implements a 1% tax per month on over-contributions, which is why you should track your contributions against your limit.
Should You Contribute to a Spousal RRSP?
RRSPs allow you to contribute to a spouse’s or common-law partner’s retirement savings. This is an effective way to even out retirement income between you and your spouse, especially if one of you earns more than the other.
Here’s the gist of why it might be beneficial for you:
Income Splitting: Contributing to your spouse’s RRSP can result in tax savings since the higher-earning spouse can attribute income to the lower earner in retirement, potentially reducing the overall tax burden.
Things to consider if you contribute to your spouse’s retirement account:
- Contribution Room: Your own RRSP contribution limit is affected by your contributions to a spousal RRSP.
- Withdrawal Considerations: When your spouse withdraws the funds, they will be taxed at their marginal rate. However, early withdrawals may trigger a tax penalty to you, so consider the timing carefully.
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