Who this is for
Anyone with earned income who contributes to an RRSP or is thinking about it. This is especially for people with a workplace pension and people whose income changed. It is also for anyone who has seen the $33,810 figure and assumed it applied to them.
The six rules
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New room is 18% of last year’s earned income, capped. For 2026 the cap is $33,810 (it was $32,490 for 2025 and will be $35,390 for 2027). Earned income means employment and business income, among other things; investment income and pensions do not count. $60,000 of 2025 earned income gives $10,800 of new room for 2026.
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A pension adjustment takes room away. If you belong to a workplace pension or a deferred profit sharing plan, the pension adjustment on your T4 reduces your new room. Sometimes it reduces it to very little. Pension adjustment reversals and past-service adjustments also move it.
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Unused room carries forward. Room you did not use in earlier years stays available. The figure on your Notice of Assessment already includes it. That is the number to use, not any formula.
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The $2,000 cushion. You can be up to $2,000 over your deduction limit without penalty, if you were 18 or older in the previous year. The cushion is not deductible. Beyond it, the tax is 1% a month on the excess.
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The deadline is in the first 60 days of the next year. Contributions for the 2025 tax year had to be made by March 2, 2026. The CRA has not yet published the 2026 tax-year date; it will fall in the first 60 days of 2027. Check the CRA’s dates page rather than assuming.
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Age 71 ends contributions. December 31 of the year you turn 71 is the last day to contribute to your own RRSP. After that the plan is withdrawn, converted to a RRIF or used to buy an annuity. A younger spouse’s RRSP can still receive spousal contributions while you have room.
When you take money out
Withdrawals are taxed as income, with tax withheld at source outside Quebec of 10% up to $5,000, 20% up to $15,000 and 30% above that. The withholding is often less than the tax actually owed on the return. The Home Buyers’ Plan and Lifelong Learning Plan are the exceptions, with their own repayment rules.
How the pieces connect
RRSP room comes from earned income, TFSA room from age and residency, and RESP grant from contributions and family income. A corporation owner who pays dividends instead of salary earns no RRSP room, which is one of the trade-offs in the salary-or-dividends decision. Life insurance is separate from all of these.
One thing many people do not realize
Contributing and deducting are two different steps. You can contribute this year and carry the deduction forward to a year when your income, and your tax rate, are higher. The contribution uses your room; the deduction is yours to time. Many people in a low-income year deduct automatically and waste the deduction at a low rate.
What to prepare
- Your most recent Notice of Assessment (the RRSP deduction limit statement)
- Your T4, for the pension adjustment
- Contribution receipts for March to December and for the first 60 days
- A note of any Home Buyers’ Plan or Lifelong Learning Plan balance
When professional help may make sense
A CRA letter about excess contributions, or a large one-time income that may justify a larger deduction. Retirement within a few years. A spouse with little income where a spousal plan may fit.
How Rex Tax may be able to help
We confirm the room and decide the deduction year. We file the T1-OVP if there is an excess. We also plan withdrawals so the withholding and the final tax do not surprise you.
Official sources
- Canada Revenue Agency: MP, DB, RRSP, DPSP, ALDA, TFSA limits and the YMPE
- Canada Revenue Agency: How contributions affect your RRSP deduction limit
- Canada Revenue Agency: What happens if you go over your RRSP deduction limit
- Canada Revenue Agency: Important dates for RRSP, RRIF and RDSP
- Canada Revenue Agency: RRSP options when you turn 71
- Canada Revenue Agency: Tax rates on RRSP withdrawals
This guide is general information, not advice about your situation. It reflects the rules for the 2026 tax year. It has not yet been reviewed by a practitioner. The information was checked against the official sources listed above on the date shown. Rules change. Check the official sources above or ask us. How we prepare these guides.