What is RRSP Season?
If you listen to the radio or watch television during the first two months of a calendar year, it is likely you will come across something referred to as “RRSP season.” So, what exactly is this phenomenon?
RRSP season refers to the first 60 days of the year when Canadians can make contributions to a Registered Retirement Savings Plan (RRSP) and apply it against last year’s income. For a contribution to count against the prior year’s income, it must be made by March 2nd (March 1st in a leap year). As a refresher, an RRSP contribution reduces your taxable income. This can result in either a reduction in income tax owing or a tax refund – the particulars will depend on your employment situation.
In order to make an RRSP contribution, you first must have contribution room. This is accumulated from earned income at a rate of 18%, up to a maximum. For example, if you had $100,000 of employment income in 2019, your RRSP contribution room for 2020 would be $18,000. It is important to note that unused RRSP room carries over on an annual basis.
In summary, RRSP season refers to the first 60 days of the year when Canadians are commonly making contributions to their RRSP’s. Of course, you can contribute to an RRSP at any point throughout the year, but January and February seem to be popular times as Canadians embrace the last-minute rush.
Wanting to open an RRSP? Contact us to get started.