What is a Registered Retirement Savings Plan (RRSP)?

A retirement savings plan that you establish with a financial institution, which is registered with the government, and to which you or your spouse or common-law partner contribute. Deductible RRSP contributions can be used to reduce your taxable income. In other words, when you put money into an RRSP account with your bank, it potentially helps your tax situation.

Please review our Terms and Conditions.

All money figures are in CAD.

GENERAL FAQs

Q: Who is eligible for an RRSP?

The only conditions for eligibility are that you’re under 71 years of age, are a Canadian resident for tax purposes, and file income taxes in Canada. Minors under the age of 18 can set up an RRSP with written parental consent (or that of a legal guardian).

Q: Who can contribute to an RRSP?

Individuals who have RRSP space can contribute until December 31st of the year they turn 71 years of age.

You can contribute to your spouse’s or common-law partner’s RRSP or SPP until December 31st of the year that they turn 71 years of age.

Q: What is the RRSP contribution limit?

It’s either 18% of your past year’s income or a maximum amount of $27,230 (for 2020), whichever is smaller.

Q: What is the RRSP deduction limit?

For 2020 the limit was $27,230. For 2021 the RRSP deduction limit is $27,830. The amount may increase annually. Contributions to an RRSP can reduce the amount of income tax individuals must pay each year, so the Canada Revenue Agency (CRA) sets an annual limit on the number of contributions each eligible taxpayer can make to RRSPs to avoid excess contributions. The deduction limit refers to this year’s limit rather than taking into account any unused contributions from previous years.

Q: What if you contribute more than your RRSP deduction limit?

Generally, you have to pay a tax of 1 percent per month on your contributions that exceed your RRSP deduction limit by more than $2,000 unless:

  • withdrew the excess amounts
  • contributed to a qualifying group plan

There can be forms to file if you’re in an overcontribution situation, so please get in touch with professionals if you need help with this.

Q: What is the deadline to contribute to a RRSP, PRPP, or SPP for the purpose of claiming a deduction on your 2020 return?

Contributions made to your RRSP, PRPP or SPP or your spouse’s RRSP or SPP from March 3, 2020 to March 1, 2021 qualify.

Q: What RRSP contributions can you deduct on your tax return?

  • contributions you made to your RRSP, PRPP or SPP
  • contributions you made to your spouse’s or common-law partner’s RRSP or SPP
  • your unused RRSP, PRPP or SPP contributions from a previous year

Q: What can you not claim a deduction for?

  • amounts you pay for administration services for an RRSP
  • brokerage fees charged to buy and sell within a trusteed RRSP
  • the interest you paid on money you borrowed to contribute to an RRSP
  • any capital losses within your RRSP

Q: What is not considered a RRSP contribution?

The following are not considered to be a RRSP contribution for the purpose of claiming a deduction on your tax return. 

TAX TIP!

You have to transfer certain payments directly. To make sure that these funds are transferred on a tax-deferred basis, you must ask the payer to transfer the funds directly.

Generally, amounts you transfer directly to your RRSP do not affect your RRSP deduction limit. However, you may need to include an amount in income and claim an offsetting deduction.

Q: Can an RRSP be used to buy a house or for your education? 

You can use your RRSP to buy a house if you’re a first-time homebuyer through the Home Buyer’s Plan, and you can use your RRSP to pay for your education through the Lifelong Learner’s Plan.

Q: Can an RRSP be transferred to another person (partner/child)?

An RRSP can’t be transferred to another person while the account holder is still alive, but you can open a joint RRSP with a spouse. As a rule, you can’t transfer money from your RRSP to someone else’s RRSP while you’re still alive.

Q: Can contributions be made to a deceased individual’s RRSP?

No one can contribute to a deceased individual’s RRSP after the date of death.

But, the deceased individual’s legal representative can make contributions to the surviving spouse’s or common-law partner’s RRSP and SPP. The contribution must be made within the year of death or during the first 60 days after the end of that year.

Trying to decide between RRSPs or TFSAs? Check out our article on Saving Money now.

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Sources and further Reading

https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/rrsps-related-plans/contributing-a-rrsp-prpp/contributions-affect-your-rrsp-prpp-deduction-limit.html

https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/t4040/rrsps-other-registered-plans-retirement.html#P1127_32576

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