Overview of RRSP Contribution Rules
A Registered Retirement Savings Plan (RRSP) is a registered account governed by Canadian tax legislation that allows eligible individuals to defer tax on certain amounts contributed, subject to prescribed limits and conditions.
The information below summarizes key RRSP rules based on publicly available guidance from the Canada Revenue Agency (CRA).
Purpose of an RRSP
An RRSP is designed to allow individuals to set aside funds for retirement. Contributions made to an RRSP may be deducted from income for tax purposes, subject to available contribution room. Amounts withdrawn from an RRSP are generally included in taxable income in the year of withdrawal.
Tax Treatment
RRSP contributions may reduce taxable income in the year they are deducted.
Withdrawals from an RRSP are taxable when received.
The applicable tax rate on withdrawals depends on the individual’s income in the year of withdrawal.
Contribution Limits
RRSP contribution room is calculated annually based on earned income, as defined by CRA.
Earned income generally includes employment and self‑employment income.
Investment income such as interest or dividends does not generate RRSP contribution room.
Contribution room information is reported on the individual’s Notice of Assessment and is also available through CRA My Account.
Overcontributions
Contributions exceeding available RRSP room may be subject to a 1% monthly tax on excess amounts above the permitted threshold.
CRA administers penalties related to excess contributions in accordance with the Income Tax Act.
Unused Contribution Room
Unused RRSP contribution room may be carried forward to future years.
Contribution room accumulates annually based on earned income and CRA calculations.
Employer‑Sponsored RRSPs
Some employers offer group RRSP arrangements or matching contributions.
Employer contributions are subject to RRSP limits and reporting requirements.
Summary
RRSPs are governed by specific rules related to eligibility, contribution limits, deductions, withdrawals, and penalties. Understanding these rules is important when reporting RRSP activity on a personal income tax return.
For official guidance, individuals should refer directly to CRA publications and administrative guidance related to RRSPs.
Disclaimer: The information provided on this page is for general informational purposes only and is based on publicly available information from the Canada Revenue Agency (CRA). It does not constitute tax advice and should not be relied upon as such. Tax legislation and administrative policies are subject to change.
