RRSP

A Registered Retirement Savings Plan (RRSP) lets an individual deduct contributions from income and defer tax on investment growth until the money is withdrawn. The deduction is claimed on line 20800 and supported by Schedule 7 and the official contribution receipts.

CONTRIBUTION ROOM

New room each year: 18 percent of the previous year's earned income, up to the annual dollar limit, minus the pension adjustment (box 52 of the T4) and any past service pension adjustment, plus any pension adjustment reversal.
Dollar limits: $32,490 for 2025, $33,810 for 2026 and $35,390 for 2027.
Unused room carries forward indefinitely.
Earned income includes employment income, net self-employment income, net rental income, and taxable support received; it excludes investment income, pensions, EI and OAS.
The deduction limit is shown on the Notice of Assessment and in CRA My Account.

TIMING

Contributions made during the year or within the first 60 days of the next year (by March 1, 2027 for 2026) can be deducted for that year.
Contributions do not have to be deducted in the year made; they can be carried forward and deducted when the taxpayer is in a higher bracket.
Contributions must stop at the end of the year the annuitant turns 71, although contributions to a spouse's RRSP can continue until the spouse turns 71.

OVER-CONTRIBUTIONS

Contributions may exceed the deduction limit by a $2,000 cushion without penalty. Excess amounts above that are subject to a tax of 1 percent per month, reported on Form T1-OVP, which must be filed within 90 days after the end of the year.

SPOUSAL RRSPS

A taxpayer can contribute to an RRSP owned by a spouse or common-law partner using the contributor's own room. The contributor claims the deduction; the spouse later reports withdrawals, which splits retirement income. Withdrawals within three years of the last spousal contribution are attributed back to the contributor.

HOME BUYERS' PLAN AND LIFELONG LEARNING PLAN

Home Buyers' Plan (HBP): first-time buyers can withdraw up to $60,000 tax-free to buy or build a qualifying home. Repayment over 15 years begins the second year after withdrawal, extended to the fifth year for withdrawals from 2022 through 2028. Missed repayments are added to income.
Lifelong Learning Plan (LLP): up to $10,000 per year and $20,000 in total for full-time education, repaid over 10 years.
Contributions made within 90 days before an HBP or LLP withdrawal may not be deductible.

STRATEGY

The deduction is worth the marginal rate in the year deducted, while withdrawals are taxed at the marginal rate in retirement; RRSPs work best when the later rate is lower.
Low-income earners may benefit more from a TFSA, because RRSP withdrawals can reduce the Guaranteed Income Supplement.
Deducting RRSP contributions also lowers net income, which can increase the Canada Child Benefit and reduce the OAS clawback.