Tax Tips for Investors — Maximize RRSP Deductions: Check Out Your Notice of Assessment

Well, tax filing season should be over officially for most individuals— and that means it’s already time to think RRSP season! Will you be topping up?

Do you have an overcontribution or an excess contribution? Don’t file away your Notice of Assessment until you check your RRSP Contribution Room for 2017. Tax and financial advisors can help. The next RRSP contribution deadline is March 1, 2018, and it’s never too early to start planning for it. The maximum contribution you can make is 18% of earned income up to $26,010. But you may be able to contribute more if you haven’t maximized your past contribution room. If you’re a keener, you’ll contribute early for the 2017 tax filing year; starting today can help you average into the marketplace as well, for potentially better overall investment returns.

Not only can an RRSP contribution significantly reduce the taxes you pay, it can also help to create or increase certain social benefits, like Canada Child Benefits, or reduce clawbacks of the Old Age Security or Employment Insurance Benefits. That’s because the RRSP deduction will reduce net income – the figure these benefits are based on.

But be careful not to contribute too much! Excess contributions—that’s the amount over your Maximum RRSP Contribution Room, as shown on your Notice of Assessment, plus $2000—are subject to a 1% per month penalty, payable by March 31. Form T1-OVP, which you’ll need to complete in the event on an overcontribution, is very complicated, so do see a qualified experienced advisor, such as a DFA–Tax Services Specialist or an MFA-Retirement and Estate Services Specialist for help. 

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