RRSP Contribution Limit for 2023

Last updated on December 21st, 2022 at 01:39 am

Your RRSP contribution limit is going up in 2023! Canadian investors are already saving their money and planning their RRSP contributions for 2023. In this post, I’ll share what you need to know about the RRSP contribution limit for 2023.

What Is an RRSP?

The RRSP is Canada’s most well-known retirement savings account. Introduced in 1957, the Registered Retirement Savings Plan (RRSP) allows Canadians to make tax-deferred investments for their retirement.

When you contribute to an RRSP, you can deduct your contribution from your income. This can be a powerful tool for reducing the income tax you owe. Your RRSP contribution can be invested in stocks, ETFs, or other assets and grow tax-deferred until retirement.

What Is the RRSP Contribution Limit for 2023?

The RRSP contribution limit for 2023 is 18% of earned income reported in the previous year, subject to a maximum contribution of $30,780.

Your RRSP contribution limit may be reduced if you have an employer-sponsored pension plan. Also, your limit may be larger if you have any carry-forward contribution room from previous years.

The easiest way to discover your RRSP contribution limit is to check your notice of assessment from the Canada Revenue Agency. The assessment includes an RRSP deduction limit statement which outlines your available contribution room for the following tax year.

What Is the RRSP Contribution Limit for 2022?

The RRSP contribution limit for 2022 is 18% of earned income reported in the previous year, subject to a maximum contribution of $29,210.

RRSP Contribution Deadline

The RRSP contribution deadline for the 2023 tax year is March 1st, 2024. The RRSP contribution deadline for the 2022 tax year is March 1st, 2023 .

Calculating Your RRSP Contribution Limit

For most Canadians, calculating your RRSP contribution limit for the next year is easy. The basic RRSP calculation is your available contribution room plus 18% of your earned income in the current year.

For Canadians with pensions, you must account for pension adjustments when calculating your RRSP contribution limit.

Max RRSP Contribution

The max RRSP contribution tends to increase by a small amount every year. For the 2023 tax year, the max RRSP contribution will be $30,780. Since 2010, the maximum RRSP contribution has been indexed to annual increases in the average wage of Canadians.

What Is the RRSP Deduction Limit?

There is a lot of confusion when discussing one’s RRSP deduction limit compared to their RRSP contribution limit.

The RRSP contribution limit is the total amount one is allowed to contribute to their RRSP in the current year, which includes their past unused contribution room. Meanwhile, the RRSP deduction limit is their new contribution room for that specific year.

RRSP Contribution Limit Calculator

It’s easy to create a fully-functional RRSP contribution limit calculator in a spreadsheet tool like Excel. It’s simplest if you start with the numbers from your most recent RRSP deduction limit statement. From there, you need to enter the latest numbers for your RRSP contributions, pension adjustments, and other information.

RRSP Contribution Limit FAQ

Here’s a list of all of the most common RRSP contribution limit questions.

Does Contributing to an RRSP Reduce Your Taxes?

Yes, contributing to an RRSP is one of the best ways to reduce income taxes in Canada. By making a contribution, you reduce your income by the contributed amount. This can significantly reduces the amount of income tax that you owe. Depending on your other tax liabilities, you may receive a tax refund the next time you file your taxes.

What’s the Deadline to Contribute to Your RRSP?

March 1st, 2023 is the deadline to contribute to your RRSP for the 2022 tax year. The 2023 tax year runs from January 1st to December 31st. However, the CRA gives you until March 1st, 2024 to make additional RRSP contributions. A contribution made in January 2024 would reduce your income tax liability for the 2023 tax year.

What is RRSP Season?

RRSP season is the short period between January 1st and March 1st when many Canadians rush to make some last-minute contributions to their RRSP. It can be preferable to wait until RRSP season to contribute as it reduces the time spent waiting for a tax refund.

However, it’s always a good time to contribute to your RRSP. If you’re concerned about waiting for a tax refund, a superior strategy involves filling out form T1213 Request to Reduce Tax Deductions at Source. This form instructs your employer not to withhold taxes on income that you plan to contribute to your RRSP.

When Can You Withdraw From Your RRSP?

When you turn 71, your RRSP will convert into RRIF, which is a Registered Retirement Income Fund. Your RRIF will start to pay out the assets you’ve accumulated over the years in your RRSP. Any income received from your RRIF will be taxable at your marginal rate.

You can withdraw from your RRSP before 71, but these withdrawals will be subject to withholding tax and treated as income. Worse, you won’t regain any contribution room by withdrawing from your RRSP.

Can I Contribute to My Spouse’s RRSP?

Yes! In fact, a spousal RRSP can be a powerful tool for reducing taxes.

A spousal RRSP allows you to contribute money to your spouse or common-law partner’s RRSP. Your RRSP contribution limit will be reduced by the amount you contribute, and you will receive the tax deduction (not your spouse), thus reducing your income taxes for the year.

A spousal RRSP also helps you save taxes in another way: by balancing out the income between you and your spouse in retirement, thus reducing income taxes.

What Are Pension Adjustments?

Pension adjustments are meant to account for the value of benefits you earned from your employer’s registered pension plan or other related retirement plans. Pension adjustments do not affect your income, but they do lower your RRSP contribution limit.

What Is a Pooled Registered Pension Plan?

A Pooled Registered Pension Plan, or PRPP, is a type of pension plan in which your employer contributes to your retirement. The max amount an employee or their employer can contribute in a given tax year is constrained by the employee’s RRSP deduction limit.

Thanks for Reading!

If you’d like to learn more about the RRSP, consider reading my post comparing the TFSA vs RRSP. In it, I explain how you can determine which of the two retirement accounts you should contribute to.

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