How much RRSP room you have was settled before 2026 began

Most people meet their RRSP limit as a single line on a government letter, and treat it as a number that arrives from nowhere. In fact it is assembled from three ingredients that are all known by the time the calendar turns: what you earned the year before, a dollar cap that the federal government indexes each year, and whatever room you did not use in earlier years. Understanding the recipe makes the rest of the plan, from the March deadline to the withholding tax on withdrawals, much easier to follow.

Eighteen per cent, up to a ceiling

The starting point for 2026 is 18 % of your 2025 earned income, which mainly means employment income, net self-employment income and net rental income, not investment income. That percentage is then capped by the annual RRSP dollar limit, which the Canada Revenue Agency sets at $33,810 for 2026 (it was $32,490 for 2025 and will be $35,390 for 2027). Because 18 % of about $187,800 is $33,810, anyone who earned more than that in 2025 gets the cap rather than the percentage.

Two adjustments can follow. If you belong to a workplace pension plan, your employer reports a pension adjustment on your T4 that reduces the new room, since part of your retirement saving is already happening through the plan. And any room you did not use in earlier years is added on top: unused RRSP room carries forward indefinitely, so the limit printed for 2026 is often considerably larger than 18 % of one year's pay.

Where the figure is printed

The CRA does the arithmetic for you. The result appears on the RRSP Deduction Limit Statement that forms part of your most recent notice of assessment, and the same figure is shown when you sign in to your CRA account online. If your limit changes after the notice goes out, for example because you took part in the Home Buyers' Plan, the CRA may send a Form T1028, "Your RRSP Information". There is also an automated telephone line that reads the figure back to you.

One caution: the statement reflects the information the CRA had when it was issued. If a return is reassessed, the limit can move, so it is worth reading the latest notice rather than an older one.

The deadline is in the new year, not the old one

An RRSP contribution can be deducted on the return for the year in which it was made, or on the return for the previous year if it was made in the first 60 days of the calendar year. For the 2025 return, the CRA's window ran from 4 March 2025 to 2 March 2026. For the 2026 tax year, the first 60 days of 2027 end on 1 March 2027; the CRA confirms the exact cut-off on its RRSP pages each year, and when the 60th day falls on a weekend the deadline moves to the next business day.

A contribution made in those first 60 days does not have to be deducted straight away. You can report it and carry the deduction forward to a year when your income, and therefore your marginal tax rate, is higher. The federal brackets for 2026 start at 14 % and rise to 20.5 % above $58,523 of taxable income, so a deduction claimed in a higher-bracket year is worth more.

Illustrative only. Uses the CRA's 2026 RRSP dollar limit of $33,810 and the 18 % formula; the pension adjustment and carried-forward room are invented figures. Your own statement is the figure that counts.

The $2,000 cushion and the 1 % a month beyond it

Contributions that exceed your deduction limit are not deductible, but the rules allow a cushion of $2,000 of excess before any penalty applies, provided you were 18 or older at some point in the year. Beyond that, the CRA charges a tax of 1 % per month on the excess for every month it stays in the plan. The tax is reported on Form T1-OVP, due within 90 days of the end of the year, and the quickest remedy is to withdraw the excess. Where the mistake was a reasonable error and you are taking steps to remove it, you can ask the CRA in writing to waive or cancel the tax.

The limit on your notice of assessment is not a guess at the future; it is a calculation from income you have already earned.

Taking money out: what the bank withholds

Money withdrawn from an RRSP before it is converted to a RRIF or annuity is fully taxable income in the year of withdrawal, and the financial institution withholds tax at source. Across Canada other than Quebec the rates are 10 % on amounts up to $5,000, 20 % from $5,000.01 to $15,000 and 30 % above $15,000. In Quebec the federal portion is 5 %, 10 % and 15 % respectively, with Quebec provincial tax withheld separately. The CRA is clear that the amount withheld may not cover the tax you ultimately owe at your bracket, so a large withdrawal can leave a balance due in April.

Two programmes let you borrow from the plan without that tax. Under the Home Buyers' Plan, a first-time buyer can withdraw up to $60,000 and repay it over 15 years; for first withdrawals made between 1 January 2026 and 31 December 2028, the first repayment is not due until the fifth year after the withdrawal year. The Lifelong Learning Plan allows up to $10,000 a year, and $20,000 in total, for your own or your spouse's full-time education, repaid over a period that is generally ten years. Amounts not repaid on schedule are added to income. Buyers also have the separate First Home Savings Account to compare.

A spousal RRSP in one paragraph

You can contribute to an RRSP that belongs to your spouse or common-law partner. You claim the deduction, and the contribution uses your room, not theirs, but the money is theirs and will be taxed in their hands when withdrawn in retirement. That can even out a couple's incomes later in life. The main condition is timing: if your spouse withdraws funds in the year you contributed or in either of the two following years, all or part of the withdrawal is added back to your income instead. You can keep contributing to a spousal plan until the end of the year your spouse turns 71, even if you are already past that age yourself.

Good to know

An RRSP deduction lowers taxable income, while a TFSA contribution does not; the trade-off is that RRSP withdrawals are taxed later and TFSA withdrawals are not. Many households use both, in whatever order suits their tax bracket today compared with retirement.

Who this matters for, and what to check

• Anyone with employment or self-employment income in 2025: the RRSP Deduction Limit Statement on your latest notice of assessment, or in your CRA account, is the figure for 2026.
• Members of a workplace pension: look for the pension adjustment on your T4, which is what shrinks your new room.
• Anyone contributing in early 2027: a contribution made by 1 March 2027 can be deducted on the 2026 return; keep the receipt the institution issues for first-60-days contributions.
• Anyone near the limit: group plan payroll deductions count too, so add them up before topping up in February.
• Anyone planning a withdrawal: the 10, 20 or 30 % withheld is a down payment on the tax, not the final bill.

The takeaway

Your RRSP room for 2026 was decided by your 2025 earned income, the $33,810 cap and whatever you left unused before. The CRA prints it on your notice of assessment, so there is no need to estimate. Contributions made by 1 March 2027 can be deducted against 2026, a $2,000 cushion protects against small overshoots, and a withdrawal will have 10 to 30 % withheld, with more possibly due at filing time. Check the statement, note the deadline and keep the receipts.