The Registered Retirement Savings Plan (RRSP) is a registered Canadian investment plan that you can contribute to for retirement purposes over the course of your working life. When you, your spouse, or your common-law partner contribute money to a RRSP, your funds are exempt from being taxed in the year you make the contribution.
RRSP Contribution Limit
The RRSP contribution limit is 18% of the income you earned in the previous year during 2023 up to a maximum of $30,780 by the March 1, 2024 deadline. The contribution limit was $29,210 in 2022 and will be $31,560 in 2024. You can carry forward the RRSP contribution room that you are unable to use in any particular year.
RRSP Deduction Limit
You can find your RRSP deduction limit by going to Form T1028. You must pay a tax of 1% per month on your contributions that exceed your RRSP deduction limit by more than $2,000. This is especially beneficial if saved for your last working year before retirement. Most Canadians are in a lower tax bracket the following year. You cannot claim a deduction for amounts you pay for administration services for an RRSP. Brokerage fees are charged to buy and sell within a trusted RRSP. The interest you paid on money you borrowed to contribute. Deduct your contributions on line 20800 of your tax return.
Home Buyers Plan (HBP)
The Home Buyers Plan (HBP) is a program that allows you to withdraw from your RRSP to buy or build a qualifying home. The withdrawal limit is up to $35,000 and can be used for yourself or a related person with a disability. You have up to 15 years to repay the amounts you withdrew from your RRSP under the HBP. Your repayment period starts the second year after the year when you first withdrew funds. If you withdraw funds in 2020, your first year of repayment will be 2022. You can repay the full amount at any time. Your Home Buyers Plan account balance by going to your Government of Canada: My Account.
Lifelong Learning Plan (LLP)
The Lifelong Learning Plan (LLP) allows you to withdraw up to $10,000 in a calendar year from your RRSP to finance full-time training or education. Withdrawals can be used for you, your spouse, or your common-law partner. You cannot participate in the LLP to finance your children’s training or education.
What if I Withdraw from My RRSP?
When you withdraw funds from an RRSP, your financial institution withholds the tax. The rates depend on your residency and the amount you withdraw. For residents of Canada, the rates are:
- 10% on amounts up to $5,000
- 20% on amounts over $5,000 up to and including $15,000
- 30% on amounts over $15,000
