With the new year comes new limits on your registered plans
When contributing to registered plans such as Registered Retirement Savings Plans (RRSPs) and Tax-Free Savings Accounts (TFSAs), you’ll want to make sure you stay within the limits. Failure to do so could result in penalties and a bigger tax hit.
RRSP Contribution Limits. According to the Canada Revenue Agency (CRA) website, the RRSP Contribution Limit for income earned in 2020 will be $27,830, up from $27,230 the previous year. You can contribute up to 18% of your 2019 earned income or $27,830 – whichever is less.
Remember that unused contribution room carries over from previous years so, depending on your past contributions, you may have considerably more room available. To find out what your own limit is, consult your 2019 Notice of Assessment from the CRA or access it online via the CRA’s MyAccount service.
TFSA Contribution Limits. The Canada Revenue Agency has announced that the limit for Tax-Free Savings Accounts for the year 2021 has been set at $6,000. The agency has maintained this annual amount since 2019. Like RRSPs, any unused contribution room is still available for use. In fact, if you were at least 18 years old in 2009 (the year TFSAs were introduced), a resident of Canada and have never contributed to a TFSA, you would have $75,500 in accumulated contribution room as of 2021.
You can find all the details of your past contributions and your current contribution room on the MyAccount service on the CRA website.