New Year celebrations have come and gone, but don’t worry, it’s not too late for your client to make an RRSP contribution for 2023. The Income Tax Act allows an RRSP contribution that is made within the first 60 days of the following year to be used either in the year of contribution or in the year prior. So, if your client makes an RRSP contribution by February 29, 2024, the contribution can still be used as a deduction from their 2023 income. Definitely some good news to share with your clients!
The maximum amount your client can contribute to an RRSP for 2023 is 18% of the earned income that they reported on their 2022 tax return or $30,780 – whichever is less. However, your client may have unused RRSP contribution room that has been carried forward from prior years so they could potentially make a larger contribution. The maximum contribution they can make for 2023 (including any carry forward) is stated on their 2022 Notice of Assessment.
So, if your client forgot to make an RRSP contribution for 2023, or after reviewing their total income for 2023 they think they might need to make an additional RRSP contribution, the first step is for them to check their 2022 Notice of Assessment to determine the maximum they can contribute and then look at the tax bracket they are in for 2023 based on their income. Remember that it’s advantageous for your client to make an RRSP contribution when they are in a higher tax bracket than they expect to be when drawing their retirement income. Share this RRSP Tax Savings Calculator with your client to help them in their calculations.
For additional information on RRSPs you can share with your clients, check out the video INFOclip: RRSP vs TFSA and the article ABC’s of Spousal RRSP, as well as the Optimizing Your RRSP and Tale of Two RRSP’s calculators.
For more information on RRSPs and other investment options, be sure to contact your local PPI Collaboration Centre.