RRSP 2020: What you need to know
A Registered Retirement Savings Plan (RRSP) is a great vehicle in Canada for effectively managing your tax-deferred retirement savings. Here is what you need to know when doing your 2020 taxes as it relates to RRSPs.
What is the RRSP contribution deadline for 2020?
The last day for RRSP contributions for 2020 is Monday, March 1, 2021.
What is the 2020 RRSP deduction limit?
The RRSP deduction limit for the 2020 tax year is $27,230 or 18% of your earned income from the previous tax year, whichever is less. However, it is important to review your personal 2020 RRSP deduction limit which is indicated on your 2019 Notice of Assessment from the Canada Revenue Agency (CRA).
Your individual RRSP deduction limit includes previously unused contribution room as well as the room created based on your 2019 earned income. If you cannot locate your Notice of Assessment, contact CRA at 1 (800) 959-8281.
What is the 2020 RRSP contribution limit?
The easiest way to find this is to locate your 2019 Notice of Assessment and look at the very bottom of the section calculating your RRSP limit. You will see a line that says “Available contribution room for 2020”. That is the amount of new money you can contribute to your RRSP in 2020.
Note: if you have made RRSP contributions previously that you have not yet deducted, then your RRSP contribution limit will be less than your RRSP deduction limit.
What are the RRSP withdrawal rules at age 71?
You can contribute to an RRSP in your name or your spouse’s name up to and including the end of the year that you turn 71 years of age. If you are older than 71, you would still be able to make an RSP contribution (based on your income) to a spousal RSP up to the end of the year your spouse turns 71.
RRSPs in your name must be converted to retirement income options (RRIFs, annuities, or combinations of the two) before December 31 of the year you turn 71.
READ: RRIF Minimum Withdrawal Rules
Can I deduct my contributions made as a repayment for withdrawals made under the Homebuyer’s Plan (HBP) or Life Long Learning Plan (LLP)?
No. HBP and LLP repayments are not deductible. Such repayments are recorded on Schedule 7 of your tax return.
Do I HAVE to claim RRSP contributions in 2020 on my 2020 tax return?
No, you may deduct any amount up to your maximum deduction limit – including nothing at all. Carrying forward deductibility may make sense where you anticipate higher income in the future.
At the same time, you will be maximizing the future value of your RRSP by having contributed earlier. Discussing this question with your accountant/financial advisor is advisable.
My income last year consisted of pension or non-rental investment income (eg: dividends). Can I still make a deductible RRSP contribution?
Providing the CRA indicates you have not exceeded your 2020 RRSP contribution limit, you can make (and deduct) a contribution subject to the age requirements mentioned above. This can be particularly valuable where you have built up any unused RRSP contribution room over the years.
What are the rules with RRSP over contribution? Can I contribute more than my maximum allowable limit?
You can. Provided the CRA indicates that you have an RRSP contribution limit, you may over contribute a cumulative lifetime total of $2,000 without penalty. However, you must be able to use any RRSP over-contribution as a deduction by December 31 of the year you turn 71.
READ: Avoiding the Penalty Box: Over-Contributing to RRSPs and TFSAs
Learn More About RRSPs and Taxes
Contact your advisor today to learn more about RRSPs and how they’re right for you.
