Q: After a few years of low income, I’m finally ready to start contributing to my RRSP again.

But looking at my Notice of Assessment I completely forget what the RRSP numbers mean. My notice from last year’s taxes gives me the following:

RRSP deduction limit: $15,000

Unused contributions previously reported & available to deduct: $10,000

Available contribution room: $5,000

Can you help?!

A: No problem! Here’s the breakdown.

We’ll take the figures in reverse order because it’s easier to explain.

Your available contribution room shows the amounts you can add to your RRSPs between now and the contribution deadline. For a given tax year, the contribution deadline is the end of the first 60 days of the following year.

Unused contributions: Contributions inside your RRSP accounts can be used to reduce tax by using them for a tax deduction. But sometimes we just carry them forward, holding off on claiming the deduction until income rises, so they’ll have more impact. You have $10,000 in ‘held off’ amounts, ready for us to pounce on a good income year and reap the tax benefits. Maybe this next return will be the charm!

Finally, the deduction limit shows the maximum size of this year’s ‘pounce’, if there are enough funds in the RRSP to do it. In this case, there are $10,000 of funds available now, but if you max out the allowable contribution you can take up to $15,000 as your deduction to reduce tax.

 Read more:

Should you take out an RRSP loan?

Don’t contribute to your RRSP until you read this!

3 Things to Know about RRSPs if Your Income is Low

Check out what the Canada Revenue Agency (CRA) has to say:

The Canada Revenue Agency’s information about RRSP contributions