March 1, 2023, is the deadline for contributing to an RRSP for the 2022 tax year.
Retirement savings can challenge Canadians as they navigate various daily situations and issues. Thankfully, systems are available to assist taxpayers in building savings and making sound investments. One such system is the Registered Retirement Savings Plan (RRSP).
What is an RRSP?
An RRSP, or Registered Retirement Savings Plan, is an investment system established by the Canada Revenue Agency in 1957 that enables individuals to accumulate retirement savings on a tax-sheltered basis. This includes various investments such as stocks, bonds, and mutual funds.
The RRSP is a specific account designed to provide beneficial tax treatment for individuals who use it to invest money. This incentive encourages people to save money for retirement, making more significant capital available for investment by deferring taxes on the income earned in the account.
Contributions to an RRSP are deductible from one’s income tax return, reducing taxable income and tax liability. However, there are specific provisions that should be noted. While investment income earned within the RRSP is tax-exempt, as long as the funds remain in the account, taxes will apply at the individual’s marginal tax rate when funds are withdrawn. This provides tax deferral, typically until retirement, and the ability to make contributions and deductions based on varying marginal tax rates at different stages of life.
For the year 2022, the maximum RRSP contribution limit is $29,210.
If you have not fully utilized your RRSP contribution limit from previous years, you can carry the unused amount to 2022. This means that your RRSP contribution limit for 2022 could be higher than the maximum of $29,210.
Please get in touch with Dana Snedden, CPA, if you need assistance determining your 2022 RRSP deduction limit and the appropriate contribution.
Our accountants in Oshawa can assist in keeping your tax matters in order, alleviating any concerns you may have.