RRSP Contribution Deadline: What You Need to Know
March 3, 2025, marks the RRSP contribution deadline for the 2024 tax year. RRSP contributions made by this date can be applied to your 2024 tax return.
But do you need to scramble to make a big contribution by this deadline? The answer depends on a few factors, such as your total income, tax bracket and remaining contribution room.
Why should you know the RRSP contribution deadline?
The contributions you make towards your registered retirement savings plan, or RRSP, provide an immediate tax break while helping you plan for retirement.
Key benefits of meeting the RRSP contribution deadline include:
Income tax deduction and potential refunds: RRSP contributions made before March 3 are tax-deductible, meaning they can be used to reduce your taxable income and may even result in a tax refund.
Tax-free savings growth: The money in your RRSP can grow and earn compound interest on a tax-free basis, as long as it stays in the account.
An important point to keep in mind is that when you withdraw money from your RRSP (ideally in retirement), the withdrawal amount is considered taxable income. The benefit is that you’ll likely be in a lower tax bracket at that time, meaning the taxes you pay on the RRSP withdrawals will usually be lower. However, there are some exceptions. For example, the Home Buyers’ Plan and Lifelong Learning plan, may allow you to borrow money from your RRSP tax-free for specific purposes.
What contributions count towards the 2024 RRSP contribution deadline?
While the tax year for 2024 income and tax deductions lines up with the calendar year — January 1 to December 31, the tax year for purposes of an RRSP contribution follows a different schedule. The deadline for the 2024 RRSP contributions includes contributions made during the following terms:
First contribution period: March 1 to December 31, 2024.
Second contribution period: January 1 to March 3, 2025.
How to prepare for the RRSP deadline for your 2024 taxes
You must claim the RRSP contributions you made during the first 10-month period of 2024 as well as those (if any) made during the first 60 days of 2025, on your 2024 income tax return.
Your financial institution(s) will send you two separate receipts for these terms. So if you make an RRSP contribution between January 1 to March 3, 2025, wait to file your taxes until you receive the second tax slip.
Even though you have to record RRSP contributions made during the first 60 days of 2025 on your 2024 taxes, you don’t have to apply them as a tax deduction on this return. Instead, you can elect to carry the amount forward to your 2025 tax return — or another future year.
What happens if you miss the RRSP contribution deadline?
If you miss the RRSP deadline or choose not to apply your RRSP contributions as deductions for your 2024 tax return, that amount appears as “unused RRSP contributions” on your notice of assessment. In fact, the carry-forward option applies to all RRSP contributions regardless of when they are made.
However, be sure to declare these contributions on your taxes in the year you make them. You can apply that amount as a tax deduction in any future tax year. This strategy is ideal if you anticipate being in a higher tax bracket in the future and want to lower your taxable income.
Should you make contributions before the RRSP deadline?
Generally speaking, the higher the tax bracket you’re in, the more sense it makes to put money into an RRSP. The prevailing view is that you’ll likely be in a higher tax bracket during your working years than in retirement. Contributing during these years allows you to benefit from tax deductions that reduce your taxable income.
With the calendar year behind you, the RRSP contribution deadline provides an opportunity to review your total taxable income for 2024, assess your tax bracket, and decide whether making an additional contribution could lower your taxable income. You can also use online tax software to test different contribution amounts before making your decision.But before you make a one-time or additional contribution, make sure to check your unused contribution room for 2024. You can find this information on your notice of assessment or your CRA My Account. This will help you avoid exceeding your RRSP contribution limit and incurring any tax penalties.
RRSP contribution calculator
Find your RRSP contribution limit amount to date.
How much does RRSP contribution reduce tax?
It depends on your combined provincial and federal tax bracket. For example, suppose your taxable income for 2024 is $70,000 and your tax rate is 30%. You could contribute $10,000 (assuming you have sufficient contribution room) towards your RRSP and lower your taxable income to $60,000. This approach can save you $3,000 (30% of $10,000) in tax.
Should you contribute to RRSP if you have a low income?
If you’re in a lower tax bracket, the benefit of deducting your RRSP contributions might be minimal. In such cases, contributing to a tax-free savings account (TFSA) may make more sense. Although you won’t get a tax deduction for TFSA contributions, you also won’t pay taxes on any growth or withdrawals. As your financial situation changes, you can use your TFSA funds to invest for the future.
Take action early to avoid the RRSP deadline scramble
Taking advantage of the opportunity to evaluate the finances to contribute before the RRSP deadline may be worthwhile for people with less predictable income, such as those who are self-employed.
However, if your income is predictable, you receive a regular paycheque, and your financial circumstances favour your future savings plans, you can avoid scrambling to meet the deadline. Instead, consider setting up automatic RRSP contributions throughout the year.
This approach simplifies budgeting, allows you to benefit from investment strategies like dollar cost averaging and an employer matching program for your contributions.
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Siddhi Bagwe
Siddhi Bagwe
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