A Registered Retirement Savings Plan is a tax-deferral account. Money you contribute is deducted from your income, which lowers this year's tax, and investments grow untaxed inside the plan. You pay tax later, when the money comes out, at whatever your marginal rate is then. That is the whole trade: a deduction at today's rate in exchange for tax at tomorrow's rate.
For 2026, you earn new room equal to 18% of your 2025 earned income, up to $33,810, less any pension adjustment from a workplace plan. Unused room from earlier years carries forward. Contributions made by March 1, 2027 can be deducted on your 2026 return.
How your RRSP room is calculated
Your RRSP deduction limit for a year is the unused room you carried in plus new room for the year. New room is the lesser of 18% of the previous year's earned income and the annual dollar limit, minus the pension adjustment (PA) your employer reported on last year's T4, plus any pension adjustment reversal (PAR) if you left a pension plan. You need $187,834 of 2025 earned income to earn the full $33,810.
Earned income is not the same as total income. It includes employment income, net self-employment income, net rental income, taxable support payments received and CPP or QPP disability benefits. It does not include investment income, pension income or most government benefits, and it is reduced by rental losses and deductible employment expenses.
Worked examples
Marc earned $80,000 in 2025 and has no workplace pension. His new 2026 room is 18% × $80,000 = $14,400. With $12,000 of unused room carried forward, his 2026 deduction limit is $26,400.
Aisha earned $90,000 and her defined-benefit pension reported a PA of $6,000. Her new room is 18% × $90,000 − $6,000 = $10,200. See workplace pensions and your RRSP room for how PAs and PARs work.
What the deduction is worth
The deduction saves the tax on the slice of income it removes, so it is worth most to people in high brackets. A $5,000 deduction at $70,000 of taxable income saves between $1,375 (Nunavut) and $1,858 (Nova Scotia) of 2026 tax. The RRSP savings by province pages show the figure at every income, with the exact marginal rate bands, and the refund calculator works it out for your own numbers.
You do not have to claim a deduction in the year you contribute. Carrying it forward to a higher-income year can be worth more, and the contribution still grows tax-sheltered in the meantime.
Withdrawals
Every dollar withdrawn from an RRSP is taxable income in the year it comes out, and the room it used is gone for good. Your financial institution withholds tax at the time of withdrawal (10%, 20% or 30% depending on the amount, with different rates in Quebec), but that is only a prepayment: the real tax is settled on your return. Read RRSP withdrawals and withholding tax before taking money out early.
Two programs let you take money out tax-free as a loan to yourself:
Over-contributing
The CRA allows a cumulative cushion of $2,000 above your deduction limit. Beyond that, the excess is taxed at 1% per month. A common trap is an employer group RRSP or automatic monthly contributions that keep running after you have used your room. See over-contribution penalties and how to fix them.
Spousal RRSPs
You can contribute to an RRSP in your spouse's or common-law partner's name using your own room. You take the deduction; they pay the tax on withdrawal, ideally at a lower rate. Withdrawals within three calendar years of your last contribution are taxed back to you. See spousal RRSPs and the attribution rule.
The age-71 deadline
You can contribute to your own RRSP until December 31 of the year you turn 71. By then the plan must be converted to a Registered Retirement Income Fund, used to buy an annuity, or cashed out as taxable income. A RRIF requires a minimum withdrawal every year from the year after it is opened. See RRIF minimum withdrawals.
RRSP or TFSA?
If your marginal rate now is higher than you expect it to be in retirement, the RRSP usually comes out ahead. If it is lower, or if RRSP income in retirement would reduce income-tested benefits, the TFSA often wins. Many people use both. The decision framework works through the comparison with real numbers.
RRSP questions
What is the RRSP contribution limit for 2026?
For 2026, new RRSP room is 18% of your 2025 earned income up to a maximum of $33,810, minus any pension adjustment, plus unused room carried forward from earlier years. Your exact figure is the RRSP deduction limit on your latest Notice of Assessment.
When is the RRSP deadline for 2026?
Contributions made by March 1, 2027 can be deducted on your 2026 return. The deadline is the 60th day of the following year, moved to the next business day when it falls on a weekend.
Does unused RRSP room expire?
No. Unused room carries forward with no time limit until the end of the year you turn 71.
Do I have to deduct a contribution in the year I make it?
No. You can contribute now and carry the deduction forward to a later year, which is worth doing if you expect a higher marginal rate soon, for example in the last year of school or before a promotion.
What happens if I over-contribute?
You can be up to $2,000 over your deduction limit without penalty. Anything above that is taxed at 1% per month until it is withdrawn or absorbed by new room, and you file form T1-OVP to report and pay it.
Can I get room back after an RRSP withdrawal?
No. Unlike a TFSA, an ordinary RRSP withdrawal permanently uses up the room. The exceptions are Home Buyers' Plan and Lifelong Learning Plan withdrawals, which are repaid to the RRSP on a schedule.