Maxed out RRSP - Contribution and Deduction Question

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Mar 26th, 2022 12:46 pm

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Mar 25th, 2022 9:33 am

max9505672 [OP]: Member; Jul 24, 2017; 207 posts; 56 upvotes

Mar 25th, 2022 9:33 am

Maxed out RRSP - Contribution and Deduction Question

Hi all,

I have a question regarding my maxed out RRSP regarding contributions and deductions.

From CRA, my:

2021 RRSP deduction limit: 16k$
Unused RRSP contribution availble to deduct for 2021: 17k$

What I understand from this is that, since I already have 1k$ more in my RRSP than my limit, I could not contribute anymore to my RRSP in 2021.

However, on January 1st 2022, I gained extra RRSP room based on my 2021 income. Let's assume I gained 10k$. So, between January 1st, 2022 and march 1st 2022, I invested 10k$ my RRSP. My understanding was that this would increase my deduction limit for 2021 to (16k$ + 10k$ = 26k$). However, my 2021 RRSP deduction limit on CRA is still at 16k$.

Is that normal? Or is it because the CRA has not been updated? Or is it because that extra deduction limit will be for next year (2022)?

Thank you!

8 replies

Mar 25th, 2022 11:34 am

JUnit: Deal Addict; Dec 28, 2007; 1181 posts; 773 upvotes

Mar 25th, 2022 11:34 am

That is normal. The increased deduction room from your 2021 earned income isn't available until the 2022 tax year.

Mar 25th, 2022 1:07 pm

max9505672 [OP]: Member; Jul 24, 2017; 207 posts; 56 upvotes

Mar 25th, 2022 1:07 pm

JUnit wrote: ↑ That is normal. The increased deduction room from your 2021 earned income isn't available until the 2022 tax year.

Really? I thought the RRSP period for 2021 was from March to December 2021 AND January to March 1st 2022.

Why are financial institutions offering RRSP loans just before March then?

Mar 25th, 2022 1:14 pm

callernamet: Deal Fanatic; Mar 10, 2018; 5163 posts; 1625 upvotes; does it matter?

Mar 25th, 2022 1:14 pm

max9505672 wrote: ↑ Really? I thought the RRSP period for 2021 was from March to December 2021 AND January to March 1st 2022.

Why are financial institutions offering RRSP loans just before March then?

really OP? and you are putting two items in this discussion. separate and still related. One is loan you weigh if it worth it but putting money before march 1st to get 25%-30% or amount back. and bank always want your money to benefit them. Loan It is not free. Like money you get after filing tax returns is not free. This money you put before march 1st is taking advantage for tax year before and not current. If you don't want to claim in that year then you do it in current year or carry on unused right? and RRSP has advantage for high income earner since TFSA was introduced right?

Tried new coffee and doughnut. Found same old stale thing. expected bill of six bucks but it was 600 million. Big mistake so the guy said don't worry it is on the house. going back to McD.

Mar 25th, 2022 1:35 pm

JUnit: Deal Addict; Dec 28, 2007; 1181 posts; 773 upvotes

Mar 25th, 2022 1:35 pm

max9505672 wrote: ↑ Really? I thought the RRSP period for 2021 was from March to December 2021 AND January to March 1st 2022.

Why are financial institutions offering RRSP loans just before March then?

Contributions made until March 1 2022 can be deducted on your 2021 taxes using your 2021 deduction limit. People who haven't maximized their 2021 contributions may be interested in borrowing money to get an increased tax refund (which they could use to partially pay back the loan). Until you've filed your 2021 taxes, the CRA won't be able to calculate your new deduction room for 2022.

+3

Mar 25th, 2022 4:59 pm

bubak: Deal Addict; Jul 15, 2009; 2843 posts; 2071 upvotes

Mar 25th, 2022 4:59 pm

max9505672 wrote: ↑ Hi all,

I have a question regarding my maxed out RRSP regarding contributions and deductions.

From CRA, my:

2021 RRSP deduction limit: 16k$
Unused RRSP contribution availble to deduct for 2021: 17k$

What I understand from this is that, since I already have 1k$ more in my RRSP than my limit, I could not contribute anymore to my RRSP in 2021.

However, on January 1st 2022, I gained extra RRSP room based on my 2021 income. Let's assume I gained 10k$. So, between January 1st, 2022 and march 1st 2022, I invested 10k$ my RRSP. My understanding was that this would increase my deduction limit for 2021 to (16k$ + 10k$ = 26k$). However, my 2021 RRSP deduction limit on CRA is still at 16k$.

Is that normal? Or is it because the CRA has not been updated? Or is it because that extra deduction limit will be for next year (2022)?

Thank you!

The $10k of room you gained on January 1st 2022 goes towards your 2022 deduction limit, not your 2021 deduction limit. You can start contributing the $10k on January 1st 2022 without any overcontribution penalties, but you won't be able to deduct more than your $16k 2021 deduction limit on your 2021 taxes. You can deduct the $10k on your 2022 taxes that you file in early 2023.

+1

Mar 25th, 2022 5:18 pm

DaveTheDude: Deal Addict; Mar 3, 2018; 3084 posts; 3458 upvotes; GTA

Mar 25th, 2022 5:18 pm

bubak wrote: ↑ The $10k of room you gained on January 1st 2022 goes towards your 2022 deduction limit, not your 2021 deduction limit. You can start contributing the $10k on January 1st 2022 without any overcontribution penalties, but you won't be able to deduct more than your $16k 2021 deduction limit on your 2021 taxes. You can deduct the $10k on your 2022 taxes that you file in early 2023.

This is correct and to add that 10K contributed before March 1, 2022 still needs to be reported on the 2021 tax return but carried forward. You won't take the actual deduction until the 2022 tax return based on carried forward contributions.

Mar 26th, 2022 12:45 pm

max9505672 [OP]: Member; Jul 24, 2017; 207 posts; 56 upvotes

Mar 26th, 2022 12:45 pm

JUnit wrote: ↑ Contributions made until March 1 2022 can be deducted on your 2021 taxes using your 2021 deduction limit. People who haven't maximized their 2021 contributions may be interested in borrowing money to get an increased tax refund (which they could use to partially pay back the loan). Until you've filed your 2021 taxes, the CRA won't be able to calculate your new deduction room for 2022.

Ok I understand now! Thanks

Mar 26th, 2022 12:46 pm

max9505672 [OP]: Member; Jul 24, 2017; 207 posts; 56 upvotes

Mar 26th, 2022 12:46 pm

bubak wrote: ↑ The $10k of room you gained on January 1st 2022 goes towards your 2022 deduction limit, not your 2021 deduction limit. You can start contributing the $10k on January 1st 2022 without any overcontribution penalties, but you won't be able to deduct more than your $16k 2021 deduction limit on your 2021 taxes. You can deduct the $10k on your 2022 taxes that you file in early 2023.

Very clear, thanks!

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