RRSP Contribution Limit for 2023/2024/2025

• The RRSP contribution limit for the 2023 taxation year is 18% of the earned income you reported on your tax return in the previous year, with a maximum cap of $30,780.

• For the 2024 taxation year, the RRSP contribution limit will increase to a maximum of $31,560, and for the 2025 taxation year, it will be $32,490.

• Any unused RRSP contribution room can be carried forward for use in subsequent years, up until the age of 71, after which you are no longer eligible to maintain an RRSP account.

• Contributions made during the first 60 days of 2024 can be claimed as deductions from income for the 2023 taxation year. The deadline for 2023 contributions is Thursday, February 29, 2024.

• Any RRSP contributions received after February 29, 2024, will not qualify for deduction in the 2023 taxation year.

Introduction to Canada’s RRSP (Registered Retirement Savings Plan)

The Registered Retirement Savings Plan (RRSP) is a popular investment vehicle in Canada designed to encourage individuals to save for retirement. Here are the key features and benefits of an RRSP:

Tax Advantages

1. Tax-Deferred Growth: Contributions to an RRSP are tax-deferred, meaning you don’t pay taxes on the money you invest or the income it earns until you withdraw it. This allows your investments to grow more quickly compared to taxable accounts.

2. Tax Deductible Contributions: Contributions to an RRSP can be deducted from your taxable income, potentially lowering your overall tax bill for the year. The annual contribution limit is 18% of your previous year’s earned income, up to a maximum set by the government (e.g., $29,210 for 2022).

Flexibility and Control

1. Wide Range of Investment Options: RRSPs offer a variety of investment options including stocks, bonds, mutual funds, GICs, and more. This allows individuals to tailor their investment strategy to their risk tolerance and financial goals.

2. Spousal RRSPs: Contributions can be made to a spousal RRSP, allowing higher-income earners to split income with a lower-earning spouse in retirement, potentially reducing the overall tax burden.

Special Programs

1. Home Buyers' Plan (HBP): The HBP allows first-time homebuyers to withdraw up to $35,000 from their RRSP tax-free to purchase or build a home. The withdrawn amount must be repaid to the RRSP within 15 years.

2. Lifelong Learning Plan (LLP): The LLP allows individuals to withdraw up to $10,000 per year, up to a total of $20,000, from their RRSP to finance full-time education or training. The withdrawn amount must be repaid to the RRSP within 10 years.

Withdrawal and Taxation

1. Retirement Income: Upon retirement, RRSPs can be converted to a Registered Retirement Income Fund (RRIF) or annuity, providing a steady income stream. Withdrawals from RRSPs or RRIFs are taxed as ordinary income.

2. Early Withdrawals: While possible, early withdrawals from an RRSP are generally discouraged as they are fully taxable and may incur withholding taxes.

For more detailed information, you can visit the Canada Revenue Agency (CRA) website.