Your contribution room is accumulating, you must take advantage of it

Your contribution room is accumulating, you must take advantage of it

Let’s say it right away: the annual limits on RRSP and TFSA contributions remain theoretical questions for most taxpayers.

• Read also: Use your TFSA as an emergency fund

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The vast majority of savers are far from having filled these accounts to their maximum, so the risk of exceeding the allowable limit is minimal.

Why ? Because the contribution room is accumulating. If you’ve never put money into a registered retirement savings plan (RRSP), the space you haven’t used in years is intact. You can fill it with a single contribution.

RRSP rights

Each year, a worker can put the equivalent of 18% of his salary in his RRSP. Did you win $ 40,000 in 2020? For that year, your rights are $ 7,200, regardless of any you would not have used in the past.

Carey Price, whose salary is around $ 15 million, could not put 18% of his income (or $ 2.7 million) in his RRSP. There is a cap, tiny for the goalie, but quite high for the ordinary world: $ 27,230 for the year 2020.

It is important to know that a worker who benefits from an employer-sponsored pension plan sees his RRSP contribution room reduced by an adjustment factor.

Each year, you can see the RRSP space available on your federal notice of assessment. If money has already been withdrawn from the RRSP through the Homeownership Plan (HBP), the notice also indicates how much to repay for the year (otherwise, you will have to pay tax on this sum as if it were income).

You can find this information on the “My Account” platform on the canada.ca site or by calling the Canada Revenue Agency (CRA).

TFSA rights

The rights accumulate in the tax-free registered account (TFSA) as in the RRSP.

What can be deposited there each year does not depend on income from work. The limits are the same for all taxpayers 18 and over, whether they are working or not.

The cap is determined annually by the federal government.

For the year 2021, it remains unchanged from the previous year, at $ 6,000.

Since this is a tax shelter and Ottawa will be looking for revenue, we should not expect dramatic increases in the next few years.

The TFSA was implemented in 2009. For a taxpayer who can contribute since the first year, the accrued benefits amount to $ 75,500 in 2021.

To find out what your unused rights are, you must go through “My Account” or contact the CRA.

TFSA CONTRIBUTION LIMITS, PER YEAR SINCE 2009
2021 $ 6,000
2020 $ 6,000
2019 $ 6,000
2018 $ 5500
2017 $ 5500
2016 $ 5500
2015 $ 10,000
2014 $ 5500
2013 $ 5500
2012 $ 5,000
2011 $ 5,000
2010 $ 5,000
2009 $ 5,000
TOTAL $ 75,500

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