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Getting a head start on RRSP contributions
4/19/2018 5:34:47 PM
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By Knowledge Bureau  | Tuesday, June 27, 2017


Tax filing season should now be over for most individuals. But don’t file away your Notice of Assessment just yet. It contains important information about the contribution room you have available for your Registered Retirement Savings Plan (RRSP). And this is critical for those who want to get a head start on contributing to their RRSPs for 2017.

Do you have an overcontribution or an excess contribution? The next RRSP contribution deadline is March 1, 2018, and it’s never too early to start planning for it. The maximum contribution you can make is 18% of earned income up to $26,010. But you may be able to contribute more if you haven’t maximized your past contribution room. If you’re a keener, you’ll contribute early for the 2017 tax filing year. Starting today can help you average into the market as well, for potentially better overall investment returns.

Not only can an RRSP contribution significantly reduce the taxes you pay, it can also help to create or increase certain social benefits, like Canada Child Benefits, or reduce clawbacks of the Old Age Security or Employment Insurance Benefits. That’s because the RRSP deduction will reduce net income – the figure these benefits are based on.

But be careful not to contribute too much! Excess contributions – that’s the amount over your maximum RRSP contribution room, as shown on your Notice of Assessment, plus $2,000 – are subject to a 1% per month penalty, payable by March 31. Form T1-OVP, which you’ll need to complete in the event of an overcontribution, is very complicated, so it’s prudent to see a qualified tax advisor, such as a DFA-Tax Services Specialist or an MFA-Retirement and Estate Services Specialist for help.

This article originally appeared in the Knowledge Bureau Report, © 2017 The Knowledge Bureau, Inc. Reprinted with permission. All rights reserved.

Notes and Disclaimer

©2017 by Fund Library. All rights reserved.

The foregoing is for general information purposes only and is the opinion of the writer. No guarantee of investment performance is made or implied. It is not intended to provide specific personalized advice including, without limitation, investment, financial, legal, accounting or tax advice.

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