RRSPs

January 1stis the unofficial start to RRSP season. While RRSP seasons in recent years has not been as hectic as it was in the late 1990’s and early 2000’s, there are still several investors who wait until January and February to make their annual RRSP contributions.  I thought it would be good to compile the top 10 RRSP questions we receive from our clients.

 

1. When is the RRSP contribution deadline for the 2019 tax year?

 You can make an RRSP contribution during the first 60 days of the year.  This typically falls on March 1st, but with 2020 being a leap year it will fall on February 29th.  However, February 29this a Saturday so the deadline is pushed to the first business day which would be March 2nd.  

 

2. How much can I contribute to my RRSP?

 The maximum RRSP contribution allowable for the 2019 tax year is $26,500.  

 

 3. How is my RRSP contribution room calculated?

 Your RRSP contribution room is calculated by taking 18% of your earned income from the previous taxation year.  Your individual maximum contribution will also reflect any 2018 pension adjustment and carry-forward of unused deduction limits from previous years.

 

4. Where can I verify my maximum RRSP contribution limit?

 This information can be found on your previous year’s Notice of Assessment from the Canada Revenue Agency.  This assessment will also include any unused deductions from previous years.

 

5. Do I have to use all my RRSP contributions as a deduction against my income in the year I make the contribution?

 No, you can carry all or a portion of the contribution forward to deduct against your income in future years.

 

6. What happens if I over contribute to my RRSP?

 You can have a lifetime over contribution of $2,000 with no implications.  If you exceed this then there is a penalty tax of 1% per month for every month you have exceeded $2000 in over contribution.

 

7. If I do not make the maximum RRSP contribution, do I lose it?

Not necessarily.  If you have not maximized your RRSP contribution for any year since 1991, you can carry it forward to future years.

 

8. What is the maximum age I can contribute to an RRSP?

You may contribute to an RRSP until December 31st of the year you turn 71.

 

9. Can I use my RRSP to purchase a home?

In most circumstances any money you withdraw from your RRSP is considered fully taxable.   Under the Home Buyers’ Plan, you can use up to $35,000 of your RRSP (tax free) as a loan for a home purchase.  There are several conditions to be met.  The plan is open to first time home buyers (check if you qualify) with a written agreement to buy or build a qualifying home for themselves.  

 

 10. Can I use my RRSP for education purposes?

 Yes, under the Lifelong Learning Plan an individual can withdraw up to $20,000 from their RRSP to finance full-time training or education for themselves, spouse or common-law partner.

 

Be well advised. 

 

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