How to determine RRSP contribution limit this tax season

Julie Seberras, head of wealth planning at Manulife Wealth, joins BNN Bloomberg to discuss RRSPs as deadline's coming up on March 2.

The deadline for RRSP contributions for 2025 is fast approaching and contributions made in the first 60 days of the year could help lower last year’s tax bill, a wealth manager says.

Canadians have until March 2 to contribute, according to the Canada Revenue Agency.

Julie Seberras, Manulife’s head of wealth planning and practice management says the 2025 RRSP contribution limit is based on 18 per cent of 2024 earned income, up to a maximum of $32,490.

“Don’t worry, you don’t need to calculate that number yourself,” says Seberras. “The CRA provides that for you on your notice of assessment.”

Seberras says the 2025 contribution limit would have showed on the 2024 notice of assessment when taxes were filled.

Group RRSPs reduce contribution limit

Canadians can hold a group RRSP made by their employer, according to the CRA.

Seberras says contributions made in a group RRSP by employees and employers however will reduce the contribution limit for the current tax year.

“Make sure that you’re not overlooking the money that your employer has put in on your behalf as well, because that counts against your contribution room,” says Seberras.

She says RRSPs offer tax benefits, especially for high-income earners, and are essential for retirement savings.

“You take out the money in retirement, when possibly your tax rate is lower because your income is lower in retirement,” says Seberras.

She says a Tax Free Savings Account, Home Buyers Plan and Lifelong Learning Program, while flexible, have repayment requirements.

Penalties for excess contributions

Overcontributions against the limit will incur penalties in an RRSP, according to the CRA.

Canadians will pay a tax of one per cent per month on unused contributions if the limit is exceeded by more than $2,000.

“If you do find yourself in a situation where you have over contributed, you want to get that money out as soon as possible to stop those penalties,” says Seberras.

She says the taxpayers should be tracking their contribution room.

With files from Julia Stratton, BNN Bloomberg