RRSP and TFSA contributions

RRSP and TFSA contributions

A Registered Retirement Savings PlanRegistered Retirement Savings Plan A plan that lets you save for retirement while lowering your income taxes. You choose how you want to invest your savings. You don’t pay tax on any money in your account until you take it out.+ read full definition (RRSPRRSP See Registered Retirement Savings Plan.+ read full definition) is a type of investmentInvestment An item of value you buy to get income or to grow in value.+ read full definition accountAccount An agreement you make with a financial institution to handle your money. You can set up an account for depositing and withdrawing, earning interest, borrowing, investing, etc.+ read full definition designed for retirement savings. A Tax-free Savings AccountTax-Free Savings Account A Tax-Free Savings Account (TFSA) is a registered savings account that provides tax benefits. In most cases, investment income, including capital gains and dividends, earned in a TFSA is not taxed, even when withdrawn. There are annual contribution limits but you can carry forward any unused contribution room from previous years.+ read full definition (TFSATFSA See Tax-Free Savings Account.+ read full definition) may be used for any type of savings goal, including retirement.

Any money you hold in RRSPs and TFSAs is taxTax A fee the government charges on income, property, and sales. The money goes to finance government programs and other costs.+ read full definition sheltered. RRSP contributions are tax deductible, but TFSA contributions are not.

Each type of account has a different limit on how much money you can contribute each year. For RRSPs, this amount depends on how much income you earned that year. For TFSAs, the amount is the same each year for all Canadians.

Making RRSP contributions

You must have earned income to contribute to an RRSP. To start building RRSP contribution roomContribution room The amount you can put into a savings plan like a Registered Retirement Savings Plan (RRSP). If you do not put the full amount into the plan each year, you will have extra, unused contribution room that you can use in later years. Example: Let’s say you can contribute $12,000 to your RRSP this year,…+ read full definition, you have to file an income taxIncome tax A charge you pay based on your total income from all sources. The Canadian government and your province set the rate.+ read full definition return — even if you don’t owe any tax. Your notice of assessment will tell you how much money you can put into your RRSP each year.

Claiming your RRSP contributions

You can claim a tax deductionTax deduction A cost that you can deduct from your income when you file your taxes. This lowers the tax that you owe. For example, if you contribute $5,000 to your RRSP, you can deduct $5,000 from your income when you file your taxes.+ read full definition for the amount you contribute to your RRSP each year. Here’s how it works:

  1. You can claim up to certain limits each year.
  2. If you have a pensionPension A steady income you get after you retire. Some pensions pay you a fixed amount for life. Others save up money for you while you are working. You use that money to create income after you retire.+ read full definition plan, your RRSP contributionContribution Money that you put into a savings or investment plan.+ read full definition will be reduced by an amount known as a pension adjustment or PA. Your PA is reported on your T4 slip each year.
  3. If you don’t contribute the full amount you are allowed in any one year, you can carry forward any unused contribution room.
  4. You don’t have to deduct amounts in the year you contributed them. For example, you can wait until you are in a higher tax bracketTax bracket The rate at which you pay tax, based on your income level.+ read full definition.

Learn more about contributing to an RRSP.

You must file a tax return to earn RRSP contribution room. You don’t have to file a tax return to earn TFSA contribution room. Learn more about the differences between TFSAs and RRSPs.

Making TFSA contributions

Unlike an RRSP, you can’t deduct your contribution from the income you report on your tax return. Here’s how TFSA contributions work:

  1. You can contribute to a TFSA whether or not you have earned income that year.
  2. You don’t have to earn contribution room in a TFSA.
  3. You have to be 18 or older and have a valid Canadian Social Insurance Number (SIN).
  4. For 2023, the TFSA contribution limit is $6,500. Each year, the amount is indexed to inflationInflation A rise in the cost of goods and services over a set period of time. This means a dollar can buy fewer goods over time. In most cases, inflation is measured by the Consumer Price Index.+ read full definition and rounded to the nearest $500.
  5. If you don’t contribute the full amount you are allowed in any one year, you can carry forward any unused contribution room, based on the contribution limits for each year.

Learn more about contributing to a TFSA.


  1. You can deduct your RRSP contributions, up to certain limits, from your taxable incomeTaxable income The amount of income you have to pay tax on, after tax credits and deductions.+ read full definition.
  2. You can’t deduct your TFSA contributions from your taxable income, but any Canadian can use a TFSA regardless of income level.
  3. RRSPs are primarily designed to help you save for retirement. TFSAs may be used for any savings goal.
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