RRSP Deadline Approaching: Maximize Your 2025 Contribution

If you're employed or self-employed in Canada, the RRSP contribution deadline is one of the most important dates on your financial calendar. You have until March 3, 2026 to make RRSP contributions that will reduce your 2025 tax bill.

That might sound like plenty of time, but it's only about 5 weeks away. And if you wait until the last minute, you might miss out on this valuable tax-saving opportunity.

Why the March 3rd Deadline Matters

The RRSP contribution deadline is always 60 days after the end of the tax year. For your 2025 tax return, that deadline falls on March 3, 2026.

Here's what this means:

• Any contributions made between January 1, 2026 and March 3, 2026 can be claimed on your 2025 tax return

• Contributions made after March 3, 2026 can only be claimed on your 2026 return (filed in 2027)

• You can reduce your 2025 taxable income by the amount you contribute (up to your limit)

If you had a strong income year in 2025—whether from employment, self-employment, or your small business—maxing out your RRSP contribution now could save you thousands in taxes.

How Much Can You Contribute?

Your RRSP contribution room is based on your previous year's earned income. For 2025 contributions, you can contribute the lower of:

• 18% of your 2024 earned income, or

• $31,560 (the 2025 maximum)

Plus any unused contribution room carried forward from previous years.

Where to find your contribution room:

The easiest way is to check your most recent Notice of Assessment from CRA. It shows your available RRSP deduction limit right on the first page.

You can also:

• Log into your CRA My Account online

• Call CRA's Tax Information Phone Service (TIPS) at 1-800-267-6999

• Check the RRSP Deduction Limit Statement that came with your 2024 tax return

Important for business owners: If you paid yourself salary in 2024, that creates RRSP contribution room for 2025. If you only took dividends, those don't generate RRSP room. This is one reason why a salary/dividend mix strategy can be beneficial.

The Tax Savings: A Real Example

Let's say you're a small business owner in Ontario who had $80,000 in taxable income in 2025, and you have $14,400 in available RRSP contribution room.

Without RRSP contribution:

• Taxable income: $80,000

• Combined federal/Ontario tax: approximately $18,500

With maximum RRSP contribution:

• RRSP contribution: $14,400

• Taxable income: $65,600

• Combined federal/Ontario tax: approximately $13,800

• Tax savings: $4,700

That's a $4,700 reduction in your tax bill for putting money into your own retirement savings. Your actual savings will vary based on your income level and province, but the principle is the same: RRSPs give you an immediate tax deduction.

RRSP vs TFSA: Which Should You Choose?

This is one of the most common questions I get, and the answer is: it depends on your situation.

Choose RRSP when:

• Your current income is high and you expect lower income in retirement

• You're in a higher tax bracket now (you get the deduction at your current rate)

• You want to reduce this year's tax bill immediately

• You have a company pension and need additional retirement savings

• You're buying your first home (RRSP Home Buyers' Plan lets you withdraw up to $60,000)

• You're going back to school (Lifelong Learning Plan)

Choose TFSA when:

• Your current income is relatively low (you're in a lower tax bracket)

• You expect higher income in the future

• You want flexibility to withdraw money without tax consequences

• You've already maxed out your RRSP

• You're saving for medium-term goals, not just retirement

• You're already retired or semi-retired

The ideal strategy for many people: Contribute to both. Max out your RRSP to reduce current taxes, then put additional savings into your TFSA.

For business owners specifically: If you had a particularly high-income year in 2025 (maybe you sold a major contract or had exceptional profits), an RRSP contribution can help smooth out that income spike and reduce the tax hit.

Common RRSP Mistakes to Avoid

1. Contributing without deducting

You can contribute to your RRSP and choose not to claim the deduction this year. You'd save it for a future year when you're in a higher tax bracket. But most people should claim the deduction in the year they contribute to maximize their immediate tax benefit.

2. Over-contributing

You're allowed a $2,000 over-contribution buffer, but anything beyond that results in a 1% per month penalty on the excess amount. Check your contribution room carefully before contributing.

3. Waiting until the deadline

The closer you get to March 3rd, the busier financial institutions become. Online systems can be slow, branches are packed, and if something goes wrong with your contribution, you might not have time to fix it.

Contribute early in the year (or even throughout the year via regular contributions) to avoid the rush and give your money more time to grow tax-deferred.

4. Not having a plan for the tax refund

Many people contribute to their RRSP, get a big refund, and spend it. A smarter approach: use your refund to make another RRSP contribution (which you can claim on next year's return), pay down high-interest debt, or add to your TFSA.

5. Forgetting spousal RRSPs

If you earn significantly more than your spouse or common-law partner, contributing to a spousal RRSP can help split retirement income and reduce your family's overall tax burden. You get the tax deduction now, but the money belongs to your spouse for withdrawal purposes.

What Counts as "Earned Income" for RRSP Purposes?

Not all income generates RRSP contribution room. Here's what counts:

Earned income includes:

• Employment income (salary and wages)

• Net self-employment income (after expenses)

• Net rental income

• Royalties

• Disability benefits from CPP/QPP

• Spousal/child support received

Does NOT include:

• Investment income (interest, dividends, capital gains)

• Pension income

• RRSP/RRIF withdrawals

• Employment Insurance benefits

• Old Age Security

• Most scholarships and bursaries

For business owners: Your net business income (revenue minus expenses) from 2024 determines your 2025 RRSP contribution room. This is why accurate bookkeeping matters—it directly affects your retirement savings opportunities.

Making Your Contribution

You have several options for making your RRSP contribution:

1. Lump sum contribution Transfer money directly from your bank account to your RRSP. Most banks allow this online, or you can visit a branch.

2. Pre-authorized contributions Set up automatic monthly or bi-weekly contributions. This is one of the best strategies because:

• You're dollar-cost averaging (buying when markets are up and down)

• You don't have to scramble at the deadline

• You benefit from compound growth throughout the year

3. Contribute in kind You can transfer eligible investments you already own into your RRSP. Be careful though—this triggers a deemed disposition and you'll pay capital gains tax if the investment has increased in value.

Don't forget your receipt: Your financial institution will issue an RRSP contribution receipt. You need this to claim your deduction. Keep it with your tax documents.

After You Contribute: Claiming Your Deduction

When you file your 2025 tax return, you'll report your RRSP contribution on Schedule 7. Your tax software or tax preparer will handle this, but make sure you:

• Report the correct contribution amount (check your receipt)

• Don't claim more than your available deduction limit

• Keep your receipt in case CRA asks for it

Your RRSP deduction directly reduces your taxable income, which means you'll either owe less tax or receive a bigger refund.

Special Considerations for 2026

First-Home Savings Account (FHSA): If you're saving for your first home, you might also want to consider the FHSA, which combines features of both RRSPs and TFSAs. You get a tax deduction for contributions (like an RRSP) but can withdraw for a home purchase tax-free (like a TFSA). The 2025 contribution limit is $8,000.

Rising interest rates: While market volatility might make you nervous about investing, remember that RRSPs are long-term retirement savings. The tax deduction you get now is guaranteed, and you have decades for your investments to grow.

Bottom Line: Don't Leave Money on the Table

An RRSP contribution is one of the few legal ways to reduce your tax bill after the year is already over. If you earned income in 2024 and have contribution room available, you owe it to yourself to at least consider maximizing your contribution before March 3, 2026.

Even if you can't contribute the maximum, contributing something is better than contributing nothing. Every dollar you put in reduces your taxable income by that same dollar.

Not sure how much to contribute or whether RRSP or TFSA makes more sense for your situation?

I can help you:

• Calculate your optimal contribution amount

• Understand the tax implications for your specific income level

• Develop a strategy that balances RRSP, TFSA, and business savings

• Plan your contributions to maximize tax benefits

📧 Email: info@trustedbr.ca
📞 Phone: 1-800-655-4544
🌐 Website: www.trustedbr.ca
📱 Social: @trustedbr

Let's make sure you're making the smartest decision for your financial future.