How to Calculate RRSP Contribution Limit

A Registered Retirement Savings Plan (RRSP) is a government-approved savings vehicle designed to help individuals save for retirement. This plan allows investments to grow with taxes deferred until funds are withdrawn, typically in retirement. Contributions made to an RRSP can also be deducted from taxable income, potentially reducing the amount of tax owed. Understanding the annual contribution limit is important to maximize these benefits and avoid penalties.

Understanding the Components of Your Limit

Your RRSP contribution limit is influenced by several specific financial factors. A primary factor is your “earned income” from the previous year. This includes employment earnings, net income from self-employment, net rental income, taxable alimony or maintenance payments received, and certain disability benefits from the Canada Pension Plan or Quebec Pension Plan. However, not all income counts; investment income, regular pension income, Employment Insurance benefits, and Workers’ Compensation benefits are generally excluded from earned income for RRSP purposes.

Another factor that reduces your RRSP contribution room is the Pension Adjustment (PA). A PA represents the value of benefits accrued in a registered pension plan (RPP) or a deferred profit-sharing plan (DPSP) during a specific year. Employers calculate this amount and report it on Box 52 of your T4 slip, which the Canada Revenue Agency (CRA) uses to determine your subsequent year’s RRSP limit. The purpose of the PA is to ensure that individuals participating in employer-sponsored pension plans receive tax assistance comparable to those saving solely through an RRSP.

A Past Service Pension Adjustment (PSPA) also impacts your RRSP contribution room by reducing it. A PSPA arises when an individual is credited with new or improved pension benefits for past years of service under a defined benefit RPP. This adjustment ensures that the overall limit on tax-assisted retirement savings, which is 18% of income, is maintained across all forms of retirement savings. PSPAs account for additional pension credits that would have been attributed to prior years if the upgraded benefits had been in place earlier.

Conversely, a Pension Adjustment Reversal (PAR) can increase your RRSP contribution room. A PAR occurs when an individual ceases to be a member of an RPP or DPSP, particularly if the termination benefit received is less than the total PAs and PSPAs previously reported.

Finally, any unused RRSP contribution room from previous years carries forward indefinitely. If you do not contribute the maximum allowable amount in a given year, the remaining room is added to your limit for future years. This accumulated unused room becomes a component of your current year’s total RRSP deduction limit.

Finding Your Official Contribution Limit

For most individuals, the simplest and most reliable way to determine their Registered Retirement Savings Plan (RRSP) deduction limit is by consulting official documents from the Canada Revenue Agency (CRA). The Notice of Assessment (NOA), which you receive after filing your annual income tax return, is the primary source. This document clearly states your RRSP deduction limit for the current year.

The RRSP deduction limit statement on your NOA provides a comprehensive overview of your available contribution room. It includes details about newly earned room, any unused room carried forward from prior years, and adjustments such as Pension Adjustments (PAs) or Past Service Pension Adjustments (PSPAs). This makes the NOA a central reference point for your annual RRSP planning.

Alternatively, you can access your personal RRSP deduction limit information online through your CRA My Account. This online portal provides real-time access to your tax information, including your current RRSP contribution room. The CRA also sends out Form T1028, “Your RRSP Information,” which outlines your deduction limit, especially if there have been changes since your last NOA. Additionally, the Tax Information Phone Service (TIPS) can provide this information by phone.

Applying the Calculation

Calculating your RRSP deduction limit involves combining the various components, starting with your available unused contribution room from prior years. This figure represents any contribution room you did not use in previous tax years, which the Canada Revenue Agency (CRA) automatically carries forward for you indefinitely. You can find this specific amount on your latest Notice of Assessment or through your CRA My Account.

Next, you add 18% of your earned income from the previous year. This percentage is a standard component of the calculation, but it is capped at an annual maximum dollar limit set by the CRA. For instance, the maximum RRSP contribution limit was $31,560 for the 2024 tax year and increased to $32,490 for 2025. Therefore, your contribution room from earned income will be the lesser of 18% of your prior year’s earned income or the annual maximum dollar limit for the current year.

From this subtotal, you must subtract any Pension Adjustments (PAs) and net Past Service Pension Adjustments (PSPAs) from the prior year. Finally, you add back any Pension Adjustment Reversals (PARs). Combining these elements—unused room, 18% of prior year’s earned income (up to the annual maximum), minus PAs and PSPAs, plus PARs—yields your total RRSP deduction limit for the current year.