The last day to make an RRSP contribution is coming up soon. For millions of Canadians, this is one of the most important financial deadlines of the year. Now is the time to act if you want to lower your taxable income, save more for retirement, or get a bigger tax refund.
The Registered Retirement Savings Plan deadline gives Canadians one last chance each year to make contributions that count toward the previous tax year. If you miss it, you could lose out on a lot of tax savings. Meeting it could mean paying less in taxes, getting a bigger refund, and seeing your retirement savings grow faster over time.
People who make smart contributions will get money back in the form of possible tax refunds. In the future, you’ll get another payment as those contributions grow tax-free and become retirement income.
This in-depth guide covers everything you need to know about the RRSP deadline, who can contribute, how much you can contribute, the tax benefits, the penalties for overcontributing, the best times to contribute, and how to make the most of your remaining room before the deadline.
When is the last day to make an RRSP contribution?
The deadline for making RRSP contributions is usually 60 days after the end of the calendar year. You can still use contributions made during this time for the previous tax year.
For instance, donations made in March and March can be counted as income for last year, giving you one last chance to lower your taxable income before you file your return.
This 60-day extension is very important because it lets Canadians:
- Find out how much money they make each year
- Find out what tax bracket they are in.
- Figure out how much tax they owe or how much they will get back
- Make a final strategic contribution
If you wait too long and miss the deadline, your donation will count toward this year’s taxes instead.
Why This Deadline Is So Important
The RRSP deadline is more than just a date on the calendar. It has a direct effect on:
- Your income that is taxed
- The amount of your refund
- Your retirement savings for the long term
- Your eligibility for some benefits that are based on your income
Giving before the deadline can lower the amount of money you have to pay taxes on by a lot. That cut can either lower the amount of tax you owe or raise the amount of money you get back.
This is one of the easiest and most effective ways for many Canadians to legally and efficiently handle their taxes.
How to Make RRSP Contributions Lower Your Taxes
You can deduct your RRSP contributions from your taxes. This means that the amount you give lowers the amount of money you have to pay taxes on.
For instance:
- Your taxable income goes down to $70,000 if you make $80,000 and put $10,000 into your RRSP.
- That cut might put you in a lower tax bracket.
- The outcome could be thousands of dollars saved on taxes.
The deduction gets stronger the more money you make because you are saving at your highest tax rate.
This is why people with high incomes often put the most money into their RRSPs each year.
How to Find Out How Much You Can Contribute
You can’t put as much money as you want into your RRSP. Every year, your contribution room is based on:
- 18% of the money you made last year
- The federal government sets a maximum annual limit.
- Any unused contribution room that was carried over from previous years
- Changes to participation in pension plans
Your Notice of Assessment from the Canada Revenue Agency shows you how much RRSP space you have.
Before making a deposit, you need to check how much room you have left to contribute. You could get in trouble for giving too much.
What Will Happen If You Miss the Deadline?
You can’t use that contribution on your taxes for the previous year if you miss the final contribution date.
You can still give later, but the tax break will only apply to this year.
If this isn’t what you want,
- Last year, you paid a higher tax rate.
- You thought you would get a big refund.
- You had to lower your taxable income to be eligible for benefits.
Timing is important. Acting before the deadline makes sure you get the most tax benefit when it counts.
Payment Is Coming: What You Need to Know About Your Refund
For a lot of Canadians, giving before the deadline means getting a bigger tax refund.
The government didn’t give you that refund as a gift. You are getting back your own money because you lowered your taxable income.
Payment is coming in the form of:
- A refund by direct deposit
- Less taxes owed
- Growth of retirement income in the future
Some people use their expected tax refund to pay for the contribution itself with an RRSP loan. This can work, but you need to plan carefully so that the costs of interest don’t outweigh the benefits.
Why the timing is different for RRSPs and TFSAs
It’s important to know the difference between RRSPs and Tax-Free Savings Accounts.
You can make TFSA contributions at any time during the year, and they won’t change your past tax returns.
If you want your RRSP contributions to count for the previous tax year, though, they have to be made by a certain date each year.
Because of this structure that is based on deadlines, late winter is such an important time to plan.
Planning for Strategic Contributions
Not everyone should automatically give the most they can.
Things to think about when making a strategy are:
Tax Bracket Now vs. Tax Bracket in the Future
It might be a good idea to wait to claim the deduction if you think you’ll make a lot more money in the next few years.
You can give now and then claim the deduction later.
Clawbacks of benefits
If you contribute to an RRSP, you may be able to keep your eligibility for some government benefits that are based on income.
When to retire
If you’re close to retirement, the best ways to contribute may be different from those who are just starting out.
Rules and penalties for overcontributing
The Canada Revenue Agency lets you go over your contribution limit by $2,000 once in your life without any penalties.
On top of that, you’ll have to pay a 1% penalty tax each month on the extra amount.
It is very important to:
- Check the contribution room again
- Take into account changes to employer pensions
- Don’t accidentally make duplicate deposits.
Overcontributing can cause extra stress and work for the people in charge.
Ways to Contribute to an RRSP Before the Due Date
Contribution in a Lump Sum
A direct deposit into your RRSP account.
Contributions That Have Been Pre-Approved
Some people speed up their planned contributions to get the most out of the deduction before the deadline.
Loan for RRSP
It makes sense to borrow money to help if:
- Your refund is more than the interest on your loan.
- You have a plan to pay back the money.
- You are strict with your budget.
But you should be careful when you borrow money.
RRSPs for people who work for themselves
RRSP contributions can be very helpful if you work for yourself.
The RRSP becomes the main way to save for retirement if your employer doesn’t offer a pension plan.
Self-employed people also often have income that changes from month to month. The RRSP lets you spread out your taxable income over years when you make a lot of money.
What if you can’t give a lot?
Even small gifts can make a big difference.
For instance:
- A $1,000 donation still lowers taxable income.
- Over the years, compound growth makes retirement funds much bigger.
- Consistency is more important than making big deposits all at once.
If you don’t have a lot of money, giving what you can before the deadline will still help you.
Things You Shouldn’t Do
People often hurry as the deadline gets closer. That can cause mistakes like:
- Guessing how much space there is for contributions instead of checking it
- Not remembering employer pension changes
- Not making the processing deadline
- Not keeping receipts for contributions
- Giving money without thinking about the big picture of taxes
Planning ahead helps you avoid making expensive mistakes.
Long-Term Retirement Security and RRSPs
RRSPs are about long-term financial freedom, not just getting tax refunds right away.
Contributions grow without having to pay taxes on them. You don’t have to pay taxes on investment gains every year.
This can lead to a lot of retirement income over time.
When you take money out of your retirement account, you pay income tax at the rate that applies to you at that time, which is usually lower than when you were making the most money.
The timing difference is what RRSP tax strategy is based on.
The mental edge of doing something before the deadline
Deadlines make things urgent. That sense of urgency can be helpful.
If you wait too long, you may miss out on chances. Taking action before the final contribution date gives:
- Surety
- Planning taxes clearly
- Confidence going into tax season
- Moving toward retirement goals
After the deadline, that tax year’s chance is gone.
Filing Your Taxes After You Contribute
Once you give before the deadline:
- Keep your official receipt for your RRSP contribution.
- Put the amount on your tax return.
- Choose whether to take the full deduction now or hold some of it back for later.
Even if you don’t want to deduct the contribution right away, you still have to report it.
Retirement Age and RRSP Contributions
You can make RRSP contributions until the end of the year you turn 71.
Then, the money has to be moved to a Registered Retirement Income Fund or turned into an annuity.
This might be your last chance to contribute if you are close to 71.
The Long-Term View: Payment Is Coming Again
When people talk about payment in relation to RRSPs, they could mean one of two things.
First, you might get your tax refund after you file your return.
Second, and this is more important, the money you save now will eventually become your retirement income.
Every contribution made before the deadline is not just for this year’s taxes. It’s about making sure your money is stable for decades.
Last-minute checklist before the deadline
As the deadline for contributions gets closer, ask yourself:
- Have I checked to see how much RRSP space I have?
- Is my tax bracket high enough to benefit?
- Have I thought about how much money I might make in the future?
- Do I know how this will affect government benefits?
- Have I kept the receipt for my donation?
You are ready if the answer to these questions is yes.
The last day to make a contribution to your RRSP is one of the most important financial dates of the year.
If you contribute before it runs out, you can lower your taxes, get a bigger refund, keep your benefits, and build up your retirement savings for the long term.
People who act will get tax breaks as payment. For those who plan ahead, retirement income will come in the form of payment again.
The time is running out. Taking a look at your contribution room and making a smart choice now can save you money for a long time.
