If you haven’t yet made your RRSP contribution for 2020 and are under 71, you can make it any time up to and including March 1, 2021 (60 days after year-end).
The maximum contribution for 2020 is $27,230, or 18% of your 2019 “earned income” if that “earned income” was less than $151,277. Earned income is generally your income from:
- employment
- carrying on business (but not through a corporation unless the corporation pays you a salary; dividends and shareholder benefits are not “earned income”)
- net rental income (after expenses) from real estate
- CPP disability pension
- research grants
- taxable spousal support payments
- contributions to an “amateur athlete trust” on your behalf.
Your RRSP contribution room is reduced by your 2019 “pension adjustment” if you are a member of a registered pension plan. (This figure represents the value of employer pension benefits accrued to you during 2019.) The pension adjustment figure appears on the T4 slip for 2019 that you received from your employer in February 2020.
If you have the cash available, it is a good idea to make your contribution for each year as early in the year as possible. Then any income earned on those funds will grow tax-free in the RRSP. You could have made your 2020 contribution any time from January 1, 2020.
The maximum contribution for 2021 will be $27,830, or 18% of your 2020 “earned income” if that “earned income” is less than $154,611. Again it is reduced by your “pension adjustment” on your 2020 T4. If you have the cash available and you’re able to determine your limit, consider making your maximum contribution for 2021 — or at least part of it — early in 2021. If you’re a member of an employee pension plan, you will likely have to wait until you get your T4 for 2020 (in February) so that you know the pension adjustment; if not, you could make the contribution at the beginning of January.