Rules and Regulations
RRSPs can be complicated and it is important to take a moment to get familiar with the rules and regulations that surround them.
The annual amount you can contribute to your own RRSP or your spouse’s/common-law partner’s RRSP is defined on your latest “Notice of Assessment”, “Reassessment”, or your “T1028”, that was sent to you after processing your latest tax return. Alternatively you may contact the CRA (http://www.cra-arc.gc.ca/contact/menu-e.html) for information on your RRSP deduction limits.
Contribution amounts over your defined RRSP deduction limit may be considered an excess contribution which is subject to a 1% tax per month. There is a lifetime allowance of $2,000 for over-contributions.
Generally speaking, your allowable RRSP contribution limit for the current year is the lower of:
- 18% of your earned income form the previous year
- The maximum contribution limit for the year
- The remaining limit after any company sponsored contribution
Note: The maximum RRSP deduction limit for 2014 is $26,230. However, if you did not use your entire RRSP deduction limit for the years 1991-2018, you can carry forward the unused amount to 2018. Therefore, your RRSP deduction limit for 2018 may be more than $26,230.1 (http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/rrsp-reer/cntrbtng/lmts-eng.html)
You can also choose to delay claiming your RRSP deduction from the current year. Please remember that if you choose to do this, make sure that your allowable deduction limit has not be reached for the year you choose to apply it to.
The last day to make an eligible contribution to your RRSP in a specific taxation year is 60 days into the following calendar year.
When you choose to withdraw funds from your RRSP they will be exposed to withholding taxes. Depending on the amount, a certain amount must be held back by the administrator and remitted to the government.
|Amount of RRSP Withdrawal||All Provinces EXCEPT Quebec||Quebec Only|
|$5000 and less||10%||21%|
|$5000.01 to $15,000||20%||26%|
|$15,000 or greater||30%||31%|
Upon marital breakdown, RRSP assets can be transferred between spouses without being subject to taxes, provided:
- You are living apart when the property and assets are settled AND
- You have a written separation agreement or a court order
In the event of death, RRSP proceeds are distributed to your named beneficiary(ies) that you designated in your will or RRSP document. The proceeds of the RRSP will remain tax sheltered provided:
- The surviving spouse is the beneficiary and the assets are moved to their RRSP or RIF account;
- There is no surviving spouse, but you have listed a minor(s) as the beneficiary(ies). They must be dependant on your estate for financial support and will have the proceeds transferred to a term annuity registered in their name(s) or;
- Children or Grandchildren, regardless of their age, are financially dependant because of physical or mental infirmity. The proceeds will be transferred to an RRSP or RRIF registered in their name or to a term annuity.
In all other circumstance, the balance of the RRSP at the date of death will be included in their final tax return.