The RRSP deduction limit is the maximum amount you can contribute to your personal or a spousal RRSP in a given year and claim as a tax deduction on your income tax return. The Canada Revenue Agency calculates your RRSP deduction limit based on your earned income from the previous year and any unused contribution room from previous years. The formula for calculating your RRSP deduction limit is as follows:
- Your unused RRSP deduction room at the end of the preceding year
- Plus the lesser of the two following items:
- 18% of your earned income in the previous year
- The annual RRSP limit (for 2023, the annual limit is $30,780)
- Minus other adjustments where applicable, such as your pension adjustment (PA), prescribed amount for connected persons, pension adjustment reversal (PAR), and net past service pension adjustment (PSPA) .
You can find your RRSP deduction limit on the bottom of your latest Notice of Assessment or Reassessment or CRA My Account. If you want to calculate your RRSP deduction limit yourself, you can refer to chart 3 of Guide T4040, RRSPs and Other Registered Plans for Retirement. If you contribute more than your RRSP deduction limit, you may have to pay a tax of 1 percent per month on your excess contributions that exceed your RRSP deduction limit by more than $2,000.
