New Year celebrations have come and gone, but don’t worry, because it’s not too late to make an RRSP contribution for 2023. The Income Tax Act allows an RRSP contribution that is made within the first 60 days of the following year to be used either in the year of contribution or in the year prior. So, if you make an RRSP contribution by February 29, 2024, the contribution can still be used as a deduction from your 2023 income!

The maximum amount you can contribute to an RRSP for 2023 is 18% of the earned income that you reported on your 2022 tax return or $30,780 - whichever is less. However, you may have unused RRSP contribution room that has been carried forward from prior years so you could potentially make a larger contribution. The maximum contribution you can make for 2023 (including any carry forward) is stated on your 2022 Notice of Assessment.

So, if you forgot to make a RRSP contribution for 2023, or after reviewing your total income for 2023 you think you might need to make an additional RRSP contribution, the first step is to check your 2022 Notice of Assessment to determine the maximum you can contribute and then look at the tax bracket you are in for 2023 based on your income. Remember, that it’s advantageous to make an RRSP contribution when you are in a higher tax bracket than you expect to be when you’re drawing your retirement income. Use this RRSP Tax Savings Calculator to help you in your calculations.

For additional information on RRSPs, be sure to check out the video INFOclip: RRSP vs TFSA, the article ABC’s of Spousal RRSP, as well as the Optimizing Your RRSP and Tale of Two RRSP’s calculators.

Contact us to learn more and talk about your RRSP options.