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  • Affaires de PiassesOPM
    3•1 year ago

    The contribution limit is the maximum amount you can contribute to your RRSP.

    The deduction limit is the maximum amount you can deduct from your income after contributing to your RRSP.

    These limits are based on similar concepts but can vary over time. Let’s consider a few examples:

    • At the beginning of the year, John had a contribution limit and a deduction limit of $10,000 each. In April, he contributed $2,000 to his RRSP. Now his contribution limit is reduced to $8,000. However, he has not yet deducted this contribution from his income, so his deduction limit remains at $10,000.

    • When doing his taxes in May of the following year, John can choose to:

    •• Deduct his contribution from his income. In this case, if he hasn’t made any more contributions or gained additional contribution room, his contribution limit will match his deduction limit.

    •• Delay the deduction from his income. In this case, if he hasn’t made any more contributions or gained additional contribution room, his contribution limit will still be $2,000 higher than his deduction limit.

    • @totallynotarobot
      3•1 year ago

      So if he delays his deduction, the next year his contribution room would be $2k higher, but he wouldn’t be able to deduct the extra $2k from his income if he were to contribute it?

      • Affaires de PiassesOPM
        2•1 year ago

        No, once you’ve contributed, your contribution limit goes down definitively, and it can only go up if you gain new contribution room because you had new income.

        Let’s make it appear with 2 counters, considering that John never receives any new room to make it clearer.

        • At the beginning of the year 2021, John had a contribution limit and a deduction limit of $10,000 each.

        CL : 10k

        DL : 10k

        • In April 2021, John contributed 2k.

        CL : 10k-2k = 8k

        DL : 10k

        • In May 2022, John chose not to deduct his contribution off his 2021 income :

        CL : 8k

        DL : 10k

        • In June 2022, John contributed 5k.

        CL : 8k-5k = 3k

        DL : 10k

        • In May 2023, John chose to deduct all of his contributions off his 2022 income :

        CL : 3k

        DL : 10k - (2k + 5k) = 3k

        You should not contribute more than your contribution limit, as you’ll get a penalty (there is a 2k buffer, but you shouldn’t count on it), and you should not deduct more than your deduction limit and what you have contributed, as you’ll be reassessed by CRA.