The RRSP first 60-day rule

Now it is so-called RRSP season because many of us have a habit to contribute to RRSP right before the March 1st deadline. Some also like to put their annual bonus towards RRSP which is usually paid out around this time. Since RRSP is a saving towards retirement that we can’t access now, it takes discipline. Usually something requiring discipline result in procrastination.

It seems that the government understands that. They put the deadline of RRSP contribution on March 1st rather than December 31^st when all other tax matters use as deadline. Another key thing to remember is that the RRSP contribution made between January 1^st and March 1^st should be reported in the previous tax year. However, taxpayer has the option to use it deduct income tax for previous tax year or current tax year, of course, considering available RRSP contribution room and limits.

Here is an example. RRSP contribution made between January 1^st 2023 to March 1^st 2023 should be reported when we file income tax return for tax year 2022. However, we have the options to deduct the RRSP contributions during this period for tax year 2022 or tax year 2023. Of course, we need to keep the available RRSP contribution room in mind. That means, if there is enough RRSP room, the contribution between January 1^st 2023 all the way to March 1^st 2024 can be used for tax year 2024.

I know government wants to make it flexible for us, but this does cause some confusion. We need to keep clear and detailed record of our RRSP contributions. Fortunately, online brokerages provide RRSP contribution tax slips or monthly statement online in a timely manner. It is convenient to download them. Besides, the Notice of Assessment clearly outlines the available RRSP room in the RRSP section.

Here is a good article by H&R Block with more details.

Just one more reminder.  It is better to invest throughout the year because of dollar-cost averaging. Ideally, we want to buy the investments when the price is low, but no one can time the market well. Just get rid of the guessing game and invest regularly through the year rather than deploy a large sum of money at one time.  

Hope you have a smooth and easy tax season.