Personal Finance

Deferring RRSP deduction

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  • Feb 20th, 2022 8:23 pm
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Jr. Member
Oct 7, 2015
125 posts
22 upvotes
Brampton, Ontario

Deferring RRSP deduction

I have a question about deferring RRSP deductions. I'm living a frugal life keeping my expenses down. I've maxed out my TFSA and and have available cash to max out the RRSP.

I'm currently in my early 30s, early in my career and expect to be making a higher salary in the coming decade. Based on what I've read online, it makes sense to defer RRSP deductions to later years when I'm in a higher tax bracket. But how do I actually do this? What steps do I need to take to ensure the amounts I contribute right now are deferred?

I contribute to RRSP in 2 ways
1. Through my company RPP
2. Through Questrade RRSP plan
5 replies
Jr. Member
Jul 14, 2008
190 posts
146 upvotes
You essentially just contribute to your RRSP(s) as your normally do but you don't claim the deduction in that tax year (your tax software likely has an option for deferring RRSP deductions). Just make sure when determining if the deferral is beneficial, that you take into account the opportunity cost of deferring the refund.

Here's a link to combined tax brackets for Ontario:
https://www.taxtips.ca/taxrates/on.htm

As an example, if you were deferring to wait for a tax bracket of 31.48% vs 29.65%, that would be a gain of just over 6%. If you were deferring one year, that would make a lot of sense (essentially 6% guaranteed annual return). If you were deferring the tax refund 5 years though for that same gain, it would be a lot less attractive.
Deal Addict
Feb 2, 2007
1108 posts
1118 upvotes
GTA
StickySituation wrote: I contribute to RRSP in 2 ways
1. Through my company RPP
2. Through Questrade RRSP plan
You need to get the terminology right: an RPP is not an RRSP, although it may look like it in many respects.

You cannot defer the deduction to a registered pension plan.
Sr. Member
Oct 14, 2012
954 posts
728 upvotes
Woodstock
To delay claiming the deductions for your RRSP contributions, you need to complete Schedule 7, section C
https://www.canada.ca/content/dam/cra-a ... s7-21e.pdf

Basically, you report all of your contributions, as usual, which is shown in section A.
Then you decide how much, if anything, you want to claim for 2021, and put that on Section C line 18.

You should see the "carried forward unused RRSP contributions" in Part D.

Hope this helps.
Jr. Member
Oct 7, 2015
125 posts
22 upvotes
Brampton, Ontario
jbird7 wrote: You essentially just contribute to your RRSP(s) as your normally do but you don't claim the deduction in that tax year (your tax software likely has an option for deferring RRSP deductions). Just make sure when determining if the deferral is beneficial, that you take into account the opportunity cost of deferring the refund.

Here's a link to combined tax brackets for Ontario:
https://www.taxtips.ca/taxrates/on.htm

As an example, if you were deferring to wait for a tax bracket of 31.48% vs 29.65%, that would be a gain of just over 6%. If you were deferring one year, that would make a lot of sense (essentially 6% guaranteed annual return). If you were deferring the tax refund 5 years though for that same gain, it would be a lot less attractive.
Thank you. So it seems there's an option in the tax software I use
Jr. Member
Oct 7, 2015
125 posts
22 upvotes
Brampton, Ontario
Thank you for the clarification.
RRSP contributions can be deferred.
RPP contributions cannot be deferred to future years

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