1. Check Your RRSP Deduction Limit
Your RRSP contribution room is based on:
18% of your previous year's earned income, up to the annual limit set by the CRA ($30,780 for 2024).
Unused contribution room carried forward from previous years.
Your RRSP deduction limit is shown:
On your Notice of Assessment (NOA) from the CRA.
In your CRA My Account under "RRSP and TFSA".
2. Avoid Over-Contributing
Contributing more than your limit can result in penalties. The CRA allows a $2,000 lifetime over-contribution buffer without penalty, but exceeding this incurs a 1% monthly tax on the excess.
3. Plan Contributions to Reduce Taxes
Contribute enough to lower your taxable income into a lower tax bracket.
Consider maximizing contributions if you're in a high tax bracket to maximize your refund.
4. Consider Future Needs
If your income is lower this year, you can carry forward unused contribution room to a year when your income is higher, offering greater tax savings.
5. Use RRSP Calculators
Online tools like RRSP calculators can help determine the tax savings of different contribution amounts based on your income.
Why This Matters
Contributing the right amount to your RRSP not only reduces your current taxable income but also helps you save for retirement efficiently. Proper planning ensures you maximize your benefits without incurring penalties.