The end of the current year and the beginning of a new year are often the times that individuals consider making contributions to their Registered Retirement Savings Plan (RRSP) and Tax-Free Savings Account (TFSA). If this is something you are contemplating, here is some important information you should know.
Important RRSP information
To qualify as a 2020 deduction, contributions to your own or to a spousal RRSP must be made on or before Monday, March 1, 2021.
Your personal RRSP deduction limit can be found on your RRSP Deduction Limit Statement provided by the Canada Revenue Agency (CRA) on your most recent Notice of Assessment, which can be accessed by logging into My Account.
The maximum amount you can contribute to your RRSP is determined as follows:
- 2020: 18% of previous year’s earned income up to $27,230
- 2021: 18% of previous year’s earned income up to $27,830
- + (Plus) Pension Adjustment Reversal (PAR)
- + (Plus) Unused deduction room earned in previous years
- - (Minus) Previous year’s Pension Adjustment (PA)
- - (Minus) Current year’s Past Service Pension Adjustment (PSPA)
Important TFSA information
If you have previously fully utilized your TFSA contribution room, the maximum amount you can contribute into a TFSA in 2021 is $6,000, remaining the same as 2019 and 2020.
If you have been both a Canadian resident and over the age of 18 since 2009, and have never made a TFSA contribution, you would be able to contribute $75,500 to your TFSA in 2021.
Otherwise, if you are 18 years of age or older and a Canadian resident, your individual contribution room is calculated as follows:
- The annual TFSA dollar limit ($6,000 for 2021); plus
- Any unused TFSA contribution room from the previous year; plus
- Total amount of withdrawals from TFSAs in the previous year (excluding qualifying transfers and withdrawals of TFSA “excess”).
You can request your individual TFSA contribution room by calling 1-800-267-6999 or by logging into My Account.
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