2025 RRSP limit is $32,490 - here's what that means for your refund

The 2025 RRSP contribution limit is $32,490 - up from $31,560 in 2024. But that number only matters if you earned enough last year to qualify for it.

Your actual RRSP room is the lower of two amounts: $32,490 or 18% of your 2024 earned income. Earned income means employment income, self-employment income, rental income, and a few other sources. Investment income doesn't count.

So if you earned $50,000 in 2024, your RRSP contribution room for 2025 is $9,000 (18% of $50,000), not the full $32,490. You'd need to have earned at least $180,500 in 2024 to get the maximum room.

What this means for your tax refund

Every dollar you put into an RRSP reduces your taxable income by one dollar. The refund depends on your marginal tax rate - the rate you pay on your last dollar of income.

At $60,000 income in Ontario, your marginal rate is roughly 29.65%. Contribute $5,000 to your RRSP, and you'll get about $1,483 back. At $100,000 in Ontario, that same $5,000 contribution gets you roughly $1,575 back because you're in a higher tax bracket.

The catch: you'll pay tax on RRSP withdrawals later, presumably when your income is lower in retirement. It's tax deferral, not tax elimination.

The 18% rule creates a lag

Your 2025 RRSP room is based on what you earned in 2024. Got a raise this year? You won't see the extra RRSP room until 2026. Started working part-time? Your room shrinks next year based on this year's lower income.

This lag matters if your income fluctuates. High earners who expect a lower income year might want to use up existing room before it expires. There's no deadline - unused room carries forward indefinitely.

TaxSplit.ca will show you exactly how much you'd get back based on your province and income, plus how your room changes if your earnings go up or down.

Where to check your actual room

The CRA tracks your exact contribution room, including any carryforward from previous years. Check your most recent Notice of Assessment or log into your CRA My Account online. Don't guess - over-contributing costs 1% per month on the excess amount.

If you're deciding whether to contribute this year: above $60,000 income, the RRSP refund usually beats putting the same money in a TFSA. Below that, TFSA first often makes more sense.