Having an RRSP is one way to help you be more prepared for the future, but contributing also comes with other benefits. Daily Hive spoke with H&R Block tax expert Yannick Lemay, who explains everything you need to know about the RRSP.<\/p>\n
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Jeff Whyte\/Shutterstock<\/p>\n
Why is it important to contribute to your RRSP?<\/p>\n
Lemay outlined three main reasons why you should set aside money in your RRSP account:<\/p>\n
Saving for retirement \u2014 Lemay points out that you won\u2019t pay any income tax on the income you generate in your RRSP account until you withdraw the money.<\/p>\n
\u201cYou don\u2019t pay income tax on all of the income you generate in your RRSP account until you withdraw the money,\u201d explained Lemay. \u201cBy keeping that money in that account, then that money will make more money the next year, and the following year, because you haven\u2019t paid personal taxes on it until you withdraw those contributions later on.\u201d<\/p>\n
A bigger tax return \u2014 If you contribute before the RRSP deadline, setting cash aside in that account reduces your income and, therefore, your taxable income, states Lemay. And depending on how much you contribute, that means you could receive a bigger tax return.<\/p>\n
Access to benefits \u2014 By contributing more to your RRSP, you lower your taxable income. If your income was previously too high to qualify for certain benefits and credits, reducing your income through RRSP contributions could make you eligible.<\/p>\n
\u201cYou can also get more, for example, from the Canada Child Benefit, because those are calculated on your family\u2019s net income as well,\u201d he said.<\/p>\n
This means you could get more from the GST credit, Climate Action Incentive payment, Medical Expenses credit, and other credits calculated on your tax return.<\/p>\n
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Erman Gunes\/Shutterstock<\/p>\n
How much can Canadians contribute ahead of the RRSP deadline?<\/p>\n
According to Lemay, a simple way to estimate your RRSP contribution limit is to calculate 18 per cent<\/a> of your income from the previous year. You\u2019ll need to consider your work income or your self-employed income.<\/p>\n Lemay advises checking your contribution limit on the notice of assessment that you receive from the Canada Revenue Agency (CRA) after you file your taxes, and on your CRA My Account. You can also verify the amount by checking out the chart<\/a> on the CRA website.<\/p>\n JulieK2\/Shutterstock<\/p>\n What should you do if you\u2019re enrolled in an employer-sponsored retirement or pension plan?<\/p>\n Lemay says that if you\u2019re enrolled in an employer-sponsored RRSP, where your employer contributes to your retirement fund, it could lower your available contribution limit.<\/p>\n He explained, \u201cYour employer will include this information on your T4 slip, and the CRA will automatically reduce your RRSP contribution limit based on the information your employer provides.\u201d<\/p>\n Habanero Pixel\/Shutterstock<\/p>\n Are there carry-forward opportunities to contribute more?<\/p>\n It\u2019s important to keep track of your contributions and make sure you don\u2019t exceed your contribution limit \u2014 doing so could cost you.<\/p>\n \u201cIf you contribute more than $2,000 over your contribution limit, there are severe penalties,\u201d he warned.<\/p>\n That said, Lemay explains that if you\u2019re contributing less than your maximum RRSP limit, it doesn\u2019t mean you need to deduct the maximum limit this year on your taxes.<\/p>\n He gives the example of someone who contributes $10,000, despite having a higher maximum limit.<\/p>\n \u201cThat $10,000 is already in your RRSP account already making money on a tax-deferred basis, so you\u2019re not paying taxes on this income,\u201d he stated. \u201cOr you can choose, for example, to deduct $7,000 on your income on your tax return and keep the deduction of the balance for the following year.\u201d<\/p>\n He noted that it also depends on your tax bracket.<\/p>\n \u201cYou might want to keep the $3,000 deduction for a year you\u2019ll be in a higher tax bracket,\u201d he said. \u201cSo, you\u2019ll save more money on your contribution.\u201d<\/p>\n Check out tax credits and deductions<\/a> you may not know you can claim in Canada. Make sure to keep an eye on the\u00a0key deadlines<\/a>\u00a0and be aware of any\u00a0tax changes<\/a>\u00a0this season.<\/p>\n This article was originally published on Feb. 29, 2024. It has since been updated.<\/p>\n","protected":false},"excerpt":{"rendered":"Tax season is around the corner, and that means the deadline for the Registered Retirement Savings Plan (RRSP)…\n","protected":false},"author":2,"featured_media":496197,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[14],"tags":[64,63,99,186,184,185],"class_list":{"0":"post-496196","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-personal-finance","8":"tag-au","9":"tag-australia","10":"tag-business","11":"tag-finance","12":"tag-personal-finance","13":"tag-personalfinance"},"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts\/496196","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/comments?post=496196"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts\/496196\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/media\/496197"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/media?parent=496196"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/categories?post=496196"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/tags?post=496196"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}![\"rrsp\"](\"https:\/\/www.newsbeep.com\/au\/wp-content\/uploads\/2026\/02\/shutterstock_2190038407-scaled.jpg\"\/ "\\"\\"")
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