This tax season, challenge your tax knowledge

Tax Quiz #4: RRSP contribution room

This tax season, would you like to challenge your tax knowledge? Here is another in a series of typical tax planning and preparation situations to test you.

You just landed your first serious job in 2019. You have made $55,000 in 2019. Your employer does not offer a pension plan. You want to contribute to your Registered Retirement Savings Plan (RRSP) and take advantage of some tax savings. What is the maximum you can contribute to your RRSP?

If you said 18 per cent of your earned income, you are correct. So $9,900 is the contribution room created and the maximum you can contribute.

What if you made triple that at $165,000?

Must be $29,700 according to the math, right? Wrong. Canada Revenue Agency (CRA) limits the allowable contribution room. For 2019 it’s $26,500. In other words, you max out RRSP contribution room at an income of $147,222.

And what if in past years you have earned income but not paid attention to making RRSP contributions. What happened to that contribution room? Have you lost that opportunity?

No. Unused RRSP contribution room accumulates and carries forward to the year you turn 71.

Assuming you have unused contribution room carried forward from prior years, adding the $9,900 of new contribution room, how much can you contribute to your RRSP in 2019?

In any given year, assuming you have the contribution room, you can contribute up to the point of becoming non-taxable.

Oh no! You discover you’ve actually contributed more to your RRSP than your total available contribution room? What do you do?

CRA allows a contribution overage to a maximum of $2,000 at any given time without requiring you to remove the funds.

If your over contribution is greater than $2,000, the amount in excess of $2,000 must be removed and if not, CRA will apply a penalty and interest.

What if your employer offers a private pension plan and contributions are made to it? How much contribution room is created with your $55,000 income?

It depends. A pension adjustment is made and that amount is shown on your T4. This reduces the 18 per cent contribution room amount. Reliance on tax planning and CRA assessments is the key to knowing your contribution room when a pension adjustment is involved.

Regarding tax planning for your 2019 tax filing, what is the last day you can make an RRSP contribution?

If you said March 1, you’re wrong, for 2020 anyway. The cut off is 60 days after January 1 but being a leap year, it’s February 29 rather than March 1 this year. Oops, that’s wrong too. This year it’s March 2 since February 29 is on a Saturday.

Ron Clarke has his MBA and is a business owner in Trail, providing accounting and tax services. Email him at To read previous Tax Tips & Pits columns visit


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