How much can you contribute?

Tax laws permit you, for any given year, to contribute an amount equal to 18% of your eligible income from the previous year to your or your spouse's RRSP, up to a maximum of $19,000 in 2007, $20,000 in 2008, $21,000 in 2009 and $22,000 in 2010, less the pension adjustment (PA) for the same year. Your employer calculates the PA based on the benefits accumulated in your name in a supplemental pension plan or a Deferred Profit-Sharing Plan (DPSP).

You can increase your RRSP contribution by using your unused contribution room from previous years and making a surplus contribution.

This information (annual contribution, unused contribution room and pension adjustment) appears in the RRSP Deduction Limit Statement section of the Notice of Assessment that the Canada Revenue Agency (CRA) sends you each year after receiving your income tax return. Example of a notice of assessment

You must make your contributions for a single tax year before the end of the first 60 days of the following year.

Use your unused contribution room

If, for a given tax year, you do not make your maximum RRSP contribution (generally 18% of your income for the preceding year), you will have unused contribution room that you can use in subsequent tax years.

For example, if your maximum contribution for a year is $12,000 but you only contribute $2,000 to your RRSP, you may use the unused $10,000 portion to increase your contribution the following year for a total of $22,000 (assuming your income hasn't changed).

In other words, when you use it, your unused contribution room lets you exceed your maximum annual limit, which is $19,000.

Information about your unused contribution room appears in the RRSP Deduction Limit Statement section of the Notice of Assessment that you receive every year from the Canada Revenue Agency.

If you should come into some money unexpectedly, (inheritance, lottery winnings, bonus or other) it may be wise to use your unused contribution room and put this money in your RRSP. In some cases, you can even borrow to use your unused contribution room.

Excess contributions

By law, you are allowed to contribute up to $2,000 over your maximum, without penalty. The exceeding amount cannot be deducted from your taxable income for the current year but it can be deducted for subsequent years.