The deadline for contributing to your own or your spousal RRSP is March 1st, 2019 in order to use the contribution as a deduction on your 2018 tax return. Your allowable deduction limit for the year can be found on your Notice of Assessment from 2017, on the CRA website using the My Account services or by calling our office.
2017 Maximum RRSP deduction is 18% of income earned in 2017 to a maximum of $26,230 plus any unused deduction room from prior years.
Contributions above the allowable limit may be carried forward for use in a future year. Likewise, if you do not make contributions up to the maximum allowed; your deduction is not lost. The unused ‘contribution room’ will carry forward for your use in future years.
Please be sure to include in your 2018 filing all RRSP deduction receipts for contributions made between March 1st, 2018 and March 1st, 2019. Even if you intend to carry over the contributions made in the first 60 days of 2019 you MUST report them on your 2018 return.
We have written about the problem of over contribution to RRSP’s for the past couple of years and can only report that CRA has become even more aggressive in tracking down and penalizing those in this situation. For many years these penalties were not enforced or tracked and over the past few years more and more unfortunate taxpayers received ominous letters from CRA followed up by large bills for interest and penalties on excess contributions. In our experience we have yet to meet one person who deliberately over-contributed hoping to ‘get away’ with something. More likely, it was an innocent error, discovered late and then, to the dismay of the taxpayer, there was nothing to do but pay the penalties.
Please therefore – read the following and ensure you are not carrying excess contributions. If you are, talk to us about the easiest way to handle it and deal with it as soon as you can. CRA is not letting any taxpayer slip through the cracks on this one.
Amounts contributed to your RRSP in excess of your allowable limit are termed ‘excess contributions’. Excess contributions may sit in an RRSP and be invested but have not yet been deducted from income on your tax return. CRA permits excess contributions up to $2000 and amounts over that ceiling are subject to a penalty of 1% per month. CRA continues to take a very aggressive approach to penalizing the excess contributions and they have developed tools for tracking individuals who have over-contributed. It is imperative to withdraw excess contributions as soon as possible, the only exception to this is if you are confident you are earning more money with the funds invested than it will cost you in penalties and interest.