RRSP CARRY FORWARD – WHY WASTE IT?

‍

Carrying forward unused contribution room:

• You don’t have to deduct an RRSP contribution on your tax return in the same year you make the contribution. 
• You can carry forward the RRSP contribution room that you are unable to use in any future year.
• This unused contribution room will be taken into account on your RRSP Deduction Limit Statement, which you can find on your most recent Notice of Assessment or on CRA’s My Account.

For Example: If in 2018, 2019, and 2020, you were eligible to contribute $5,000, $7,500, and $10,000 respectively to your RRSP, however, you were not able to contribute. This means that in 2021, you have a total contribution room carry forward of:

• ($5,000 + $7,500 + $10,000) = $22,500

‍

• This unused contribution room can be carried forward indefinitely until you turn 71 years of age and can no longer have an RRSP account.
• The ability to carry forward unused RRSP room means that your contribution room will accumulate instead.
• You can carry forward your unused contributions if you think your income will be higher in the future, moving you to a higher tax bracket.

For Example: If you contribute $10,000, your tax refund based on a marginal tax rate of:

• 20% = $10,000 x 20% = $2,000
• 30% = $10,000 x 30% = $3,000
• 40% = $10,000 x 40% = $4,000

The higher your marginal tax rate, the higher the tax you save on RRSP contributions. RRSP tax deduction can also be carried forward indefinitely.